Ittttrd  States  Siatrirt  fflourt— 5Jor%rn  Statrtrt  of 
Npm  fork 


The  State  of  New  York  and  Charles  D.  Newton,  Personally 
and  as  Attorney-General  of  the  State  of  New  York, 

Plaintiffs , 


against 


The  United  States  and  Edgar  E.  Clark,  Charles  C.  McChord, 
Balthasar  H.  Meyer,  Henry  C.  Hall,  Winthrop  M.  Daniels, 
Clyde  B.  Acheson,  Robert  E.  Wooley,  Joseph  B.  Eastman, 
Henry  J.  Ford  and  Mark  W.  Potter,  Constituting  The 
Interstate  Commerce  Commission, 

Defendants. 


BRIEF  OF  ATTORNEY-GENERAL  OF  NEW  YORK 


CHARLES  D.  NEWTON, 

Attorney-General  of  New  York 

Edward  G.  Griffin  and 
George  L.  Meade, 

Deputies  Attorney -General,  of  Counsel 


VS>X>ec23-  C.L. 


385.  \ 

United  States  District  Court 

NORTHERN  DISTRICT  OF  NEW  YORK 


The  State  of  New  York  and 
Charles  D.  Newton,  Person- 
ally and  as  Attorney-General 
of  the  State  of  New  York, 
Plaintiffs, 

against 

The  United  States  and  Edgar  E. 
Clark,  Charles  C.  McChord,  l 
Balthasar  H.  Meyer,  Henry  C. 
Hall,  Winthrop  M.  Daniels, 
Clyde  B.  Acheson,  Robert  E. 
Wooley,  Joseph  B.  Eastman, 
Henry  J.  Ford  and  Mark  W. 
Potter,  Constituting  The  In- 
terstate Commerce  Commission, 
Defendants . 


BRIEF  OF  ATTORNEY-GENERAL  OF  NEW 

YORK 

This  is  an  application  for  an  interlocutory 
injunction  under  a special  statutory  practice  for 
the  purpose  of  reviewing  the  action  of  the  Inter- 
state Commerce  Commission  in  No.  11623,  Matter 
of  New  York  fares  59,  I C.  C.  290.  The  District 
Court  Jurisdiction  Act  is  found  at  pages  89-94 
of  the  pamphlet  containing  the  Interstate  Com- 
merce Act  and  Related  Sections.  It  is  taken  from 
the  Act  of  October  22,  1913  (Urgent  Deficiency 


2 


Appropriations  Act),  and  is  also  printed  38 
Stat.  L.  219,  and  in  section  998  of  tlie  United 
States  Compiled  Statutes  and  related  sections. 

Under  it  the  orders  of  the  Interstate  Commerce 
Commission  may  be  reviewed  by  an  application 
for  an  interlocutory  injunction.  The  venue  is  to 
be  laid  in  the  district  where  resides  any  of  the 
persons  or  corporations  upon  whose  petition 
the  order  of  the  Interstate  Commerce  Com- 
mission was  made.  In  this  case  the  principal 
petitioner  was  the  New  York  Central  Railroad 
which  has  its  principal  office  in  Albany.  The  or- 
ders, writs  and  process  of  the  court  run  through- 
out the  United  States.  A statutory  court  must 
be  convoked  to  grant  the  interlocutory  relief  we 
pray  for.  The  United  States  must  be  made  a 
party  defendant  and  anyone  else  interested  may 
come  in  as  a party. 

THE  PLAINTIFFS  HAVE  LEGAL  CAPACITY 
TO  SUE. 

We  will  anticipate  a jurisdictional  question  at 
the  outset  and  which  now  appears  to  be  raised 
by  the  answer  of  the  United  States.  The  State 
of  New  York  may  maintain  this  suit  according 
to  the  express  provisions  of  the  District  Court 
Jurisdiction  Act,  and  because  under  section  13, 
subdivision  3 of  the  Interstate  Commerce  Act  it 
was  made  and  was  a necessary  party  to  the  pro- 
ceeding now  attacked. 

Perhaps  this  will  be  countered  with  citation  of 
Oklahoma  v.  A.  T.  & Santa  Fe  By.,  220  U.  S.  277, 
and  see  also  220  U.  S.  290,  220  U.  S.  302.  There 
it  was  held  that  a state  could  not  invoke  the 
original  jurisdiction  of  the  United  States 


3 


Supreme  Court  to  restrain  a carrier  from  charg- 
ing unreasonable  rates  or  for  the  purpose  of 
preventing  violation  of  its  own  laws. 

We  distinguish  these  cases  on  these  grounds. 
First,  in  the  case  at  bar,  the  United  States  recog- 
nized the  interest  of  the  State  of  New  York  in 
the  proceedings  before  the  Interstate  Commerce 
Commission  by  making  the  State  a necessary 
party  to  such  proceedings  and  by  consenting  to 
be  sued  by  any  such  party.  Secondly,  the  State 
seeks  not  only  to  uphold  its  statutes,  but  seeks 
to  prevent  an  encroachment  upon  its  sovereignty 
by  the  affirmative  act  of  officers  of  the  United 
States.  Thirdly,  the  State  shows  damage  in  a 
proprietary  capacity. 

The  Oklahoma  cases  point  out  the  natural  limi- 
tations upon  the  original  jurisdiction  of  the 
Supreme  Court.  Under  the  Constitution  and  sec- 
tion 233  of  the  Judicial  Code  the  Supreme  Court 
has  original  jurisdiction  generally  where  a State 
is  a party.  If,  as  was  attempted  in  the  Oklahoma 
cases,  the  State  could  invoke  this  jurisdiction 
whenever  its  laws  were  violated,  every  prosecu- 
tion for  a penalty ‘or  any  other  case  where  a State 
was  a prosecutor  could  be  brought  in  the  Supreme 
Court.  The  court  quite  sensibly  left  such  cases 
to  the  State’s  own  courts  or  the  inferior  Federal 
Courts. 

Although  a State  may  not  generally  have  such 
an  interest  in  the  maintenance  of  a rate  as  to 
permit  it  to  sue  a railroad  in  the  Supreme  Court 
for  increasing  such  rates,  the  case  here  is  differ- 
ent. We  have  pleaded  a special  damage  to  the 
State  amounting  to  ait  least  $365,000  a year.  The 


4 


pleading  of  such  an  interest  was  not  condemned 
in  Dakota  v.  South  Dakota,  250  U.  S.  163,  at  180. 

Further  no  railroad  is  made  a party  defendant. 
The  State  is  given  the  right  to  sue  by  statute  and 
the  allegations  are  against  usurpatory  acts  of  offi- 
cers of  the  defendant  United  States.  Jurisdiction 
was  taken  in  the  National  Prohibition  cases  under 
these  circumstances.  Rhode  Island  v.  Palmer, 
253  U.  S.  350;  New  Jersey  v.  Palmer,  253  U.  S. 
350. 

We  have  also  joined  the  Attorney-General  of 
the  State  personally  and  officially.  If  he  is  not 
a good  party  plaintiff  in  the  case  at  bar  we  have 
the  contradiction  that  he  may  be  enjoined  in  the 
cases  where  the  railroads  are  plaintiffs,  but  may 
have  no  recourse  to  affirm  his  own  rights  in  the 
same  tribunal.  His  right  to  sue  in  a representa- 
tive capacity  is  confirmed  under  Equity  Buie  38 
providing  as  follows1: 

“ Rule  38.  Representatives  of  Class. 
When  the  question  is  one  of  common  or  gen- 
eral interest  to  many  persons  constituting  a 
class  so  numerous  as  to  make  it  impracticable 
to  bring  them  all  before  the  court,  one  or 
more  may  sue  or  defend  for  the  whole/’ 

Finally  the  United  States  may  be  sued  even  by 
a State,  only  in  the  tribunal  where  it  has  con- 
sented to  be  sued.  In  this  case  it  is  this  honor- 
able court.  Under  California  v.  Southern  Pacific 
Co.,  157  U.  S.  229,  258,  and  Ames  v.  Kansas,  111 
U.  S.  449,  468,  inferior  Federal  Courts  may  be 
given  concurrent  jurisdiction  with  the  Supreme 
Court  where  a State  is  a party. 

It  has  been  decided  that  where  a tribunal  has 
definitely  been  given  jurisdiction  of  the  subject 
matter,  a State  and  its  Attorney-General  are 


5 


proper  persons  plaintiff  to  sue  in  regard  to  rail- 
road rates.  American  Express  Co.  v.  Caldwell, 
244  U.  S.  617,  at  628.  In  this  case  jurisdiction 
is  expressly  given  to  the  court  not  only  over 
the  subject  matter  but  over  the  persons  of  the 
State  and  the  United  States.  The  jurisdiction  of 
the  Federal  Courts  may  be  arbitrarily  controlled 
and  extended  by  statute,  except  in  a few  cases 
where  the  Constitution  expresses  it  or  delimits 
it.  Ex  parte  McCardle,  7 Wall.  506.  In  this  case 
a particular  statute  grants  the  jurisdiction 
sought.  Abstract  principles  are  not  determina- 
tive in  such  a situation. 

The  Supreme  Court,  Appellate  Division,  Second 
Department,  in  the  case  of  People  v.  Long  Island 
Railroad  Company,  Etc.,  on  Jan.  28th  decided 
that  the  power  to  review  the  order  of  the  Inter- 
state Commerce  Commission  at  the  behest  of  a 
State  was  exclusive  in  the  Federal  Courts.  Pre- 
siding Justice  Jenks  rendered  the  oral  opinion 
of  the  Court  as1  follows' : 

“ Jenks,  P.  J.,  (orally) : 

“I  am  ready  to  announce  the  decision. 
Without  passing  upon  the  merits  of  any  ques- 
tion presented,  we  are  of  opinion  that  the 
jurisdiction  was  exclusively  that  of  the  Fed- 
eral Courts.  Disposing  of  this  appeal  upon 
that  point  only,  we  reverse  the  order  which 
granted  the  injunction,  without  costs,  and 
deny  the  injunction  without  costs.  If  the 
case  is  relieved  of  injunction,  we  grant  the 
application  for  appeal.  You  may  submit  an 
order  with  the  proposed  question.  If  the 
Attorney  General  will  serve  upon  Mr.  Keany 
a copy  of  the  proposed  order,  Mr.  Keany  may 
present  his  proposed  order  to  me.  The 
motion  for  a stay  will  be  denied.” 

2 


6 


It  certainly  must  be  true  that  of  the  various 
plaintiffs  we  join  here,  at  least  one  has  a standing 
in  this  court. 

THE  COURT  IS  WITHOUT  JURISDICTION  TO  ENTERTAIN 
THE  BILLS  OF  THE  PLAINTIFF  RAILROADS. 

Section  265  of  the  Judicial  Code  provides  : 

4 4 Section  265.  The  writ  of  injunction 
shall  not  be  granted  by  any  court  of  the 
United  States  to  slay  proceedings  in  any 
court  of  a state,  except  in  cases  where  such 
injunction  may  be  authorized  by  any  law 
relating  to  proceedings  in  bankruptcy. ’ y 

The  Plaintiff  Railroads  have  sought  to  avoid 
the  operation  of  this  ancient  statute  by  reference 
to  cases  construing  the  exclusive  jurisdiction  of 
the  national  courts  in  admiralty  and  maritime 
causes.  We  submit  that  the  analogy  fails.  In 
New  York  Central  Railroad  v.  Public  Service 
Commission , etc.,  Judges  Ward,  Hough  and 
Cooper,  convoked  as  a statutory  court,  held  that 
the  Supreme  Court  of  New  York  would  not  be 
disturbed  in  its  determination  of  a pending  case 
where  a defense1  supplied  by  an  act  of  Congress 
was  set  up.  There  is  no  difference  here.  Instead 
of  an  act  of  Congress,  the  act  of  an  administra- 
tive body  exercising  “ delegated  powers  ” is  set 
up  in  the  pending  case  in  the  Supreme  Court. 

THE  FACTS. 

The  six  Plaintiff  Railroad  cases  and  the  case 
under  which  this  brief  is  entitled  are  similar  in 
their  facts  and  the  application  of  the  law  to  the 
extent  that  the  part  is  included  in  the  whole.  The 
six  cases  may  be  regarded  as1  isolating  the  situa- 
tion of  some  of  the  trunk  line  railroads,  whilst 


7 


the  main  case  comprehensively  presents  the  situ- 
ation of  these  railroad's  as  well  as  all  the  rail- 
roads of  the  State. 

Accordingly  in  our  argument  we  shall  discuss : 
first , generally  the  law  applicable  to  the  order 
as  a whole;  secondly , the  inadequacy  of  the 
formula  of  the  Interstate  Commerce  Commission 
applied  to  trunk  line  roads  as  compared  with 
roads  located  wholly  within  the  state;  third,  the 
special  position  of  a trunk  line  carrier  under  a 
charter  contract;  fourth,  the  special  position  of 
roads  like  the  Long  Island  and  Staten  Island 
railroads,  declared  to  be  interstate  by  reason  of 
a small  interline  passenger  business. 

On  May  28,  1918,  the  Director  General  of  Rail- 
roads, pursuant  to  unquestioned  authority  under 
the  war  powers,  raised  the  level  of  all  passenger 
fares  in  New  York  State  to  three  cents  a mile. 

Federal  control  was  this  year  terminated  by 
the  Transportation  Act.  Under  section  208-a 
the  war  powers  over  railroads  were  gener- 
ally abandoned  on  March  1,  1920,  but  in  regard 
to  rates  the  law  provided  that  prior  to  Sep- 
tember 1,  1920,  the  war  rates  could  be  lowered 
by  State  authority  only  with  the  permission 
of  the  Interstate  'Commerce  Commission.  This 
has  been  accepted  by  the  Attorney-General 
as  a legitimate  extension  of  the  war  power 
through  a period  of  repose.  He  has  argued  else- 
where and  his  contention  has  been  confirmed  by 
the  Court  of  Appeals,  that  on  September  1,  1920, 
all  the  powers  of  the  states  over  rates  were 
restored  and  all  the  powers  of  the  United  States 
over  rates  derived  exclusively  from  the  war 
powers  were  on  that  date  either  lost  or  aban- 
doned. Public  Service  Commission  v.  New  York 


8 


Central  Railroad , 2301  N.  Y.  149,  affirming  193 
App.  Div.  615,  which  reversed  112  Misc.  617.  On 
September  first,  therefore,  the  posture  of  affairs 
was  that  the  railroads  generally  were  en- 
titled to  charge  three  cents  a mile  for  pas- 
sengers, their  pre-war  rate  not  being  less'  than 
the  Director  General ’s.  The  rate  permitted  the 
New  York  Central,  however,  was  only  two  cents. 
All  the  railroads1,  however,  intended  to  better 
their  position  by  an  application  to  State  author- 
ity for  an  increase. 

The  Staten  Island  Company  did  nothing  until 
the  order  of  the  Interstate  Commerce  Commis- 
sion came  down  in  November.  The  Long  Island 
Railroad  on  June  9,  1920,  applied  to  the  Public 
Service  Commission,  First  District,  alleging  that 
a 10  per  cent  increase  in  passenger  fares  was 
necessary.  This  proceeding  was  continued  until 
August  24,  1920,  when  it  was  discontinued  upon 
application  of  the  company. 

The  reason  for  this  sudden  withdrawal  from 
State  jurisdiction  was  obvious.  Several  of  the 
trunk  line  railroads  under  the  leadership  of  the 
New  York  Central  Railroad  has  determined  upon 
the  audacious. 

The  New  York  Central  had  from  September  to 
November  prevented  the  restoration  of  the  two- 
cent  fare  on  its  lines.  It  may  be  presumed  that 
it,  with  others  of  the  trunk  line  railroads1  could 
not,  like  the  Long  Island,  expect  to  show  a non- 
compensatory, or  unprofitable  or  confiscatory 
intrastate  passenger  rate.  An  opportunity  for  an 
increase  of  revenue  without  the  necessity  for  any 
such  showing  had  presented  itself.  Quite 
naturally  the  trunk  line  carriers  grasped  it  and 


9 


it  is  not  surprising  that  the  Long  Island  Rail- 
road also,  if  tardily,  followed  them  in  a venture 
that  promised  20  instead  of  a mere  10  per  centum. 

On  July  29,  1920,  the  Interstate  Commerce 
Commission,  in  a proceeding  known  as  Ex  Parte 
74,  divided  the  country  into  four  zones.  New  York 
is  included  in  the  Eastern  group,  which  is 
bounded  generally  by  the  Atlantic  Seaboard,  Can- 
ada, Norfalk,  Va.,  and  Chicago.  In  this  zone  in- 
terstate freight  rates  were  increased  40  per 
centum,  passenger  and  milk  and  cream  rates  20 
per  centum,  and  a surcharge  of  50  per  centum  to 
accrue  to  the  railroads,  but  not  to  the  Pullman 
Company,  for  space  in  sleeping  and  parlor  cars 
was  allowed. 

Now  began  the  great  adventure.  Application 
wais  made  to  the  Public  Service  Commission, 
Second  District,  to  increase  all  rates  to  the  same 
level  as  that  just  allowed  for  interstate  rates. 
The  Public  Service  Commission  denied  this 
application,  except  as  to  freight  which  is  iso  com- 
mingled with  interstate  commerce  as  to  be 
inseparable,  upon  the  ground  that  there  should 
be  some  showing  of  a need  for  this  increase. 

The  ground  work  had  been  laid  and  the  atmos- 
phere created  for  what  must  have  been  a not 
unexpected  rebuff.  Application  could  now  be 
made  to  the  Interstate  Commerce  Commission  for 
the  same  relief  and  upon  the  same  ground,  with 
some  claim  that  resort  to  State  authority  was 
useless. 

The  Long  Island  Company,  however,  could 
not  join  in  the  application  to  the  Second  District 
but  could  discreetly  recover  from  its  tactical 
error  in  applying  to  the  First  District  by  with- 
drawing its  pending  and  undecided  application 


10 


there.  Having  done  so,  it  made  all  haste  for 
the  strategic  objective  at  Washington. 

A hearing  was  held  in  New  York  City  before 
the  Chief  Examiner  of  the  Interstate  Commerce 
Commission.  Argument  upon  the  application 
wtas  heard  at  Washington  before  all  the  Commis- 
sioners October  11th,  and  the  order  of  the  Com- 
mission was  handed  down  November  13,  1920. 

The  prevailing  opinion  of  the  Interstate  Com- 
merce Commission  (seeks  vaguely  and  without 
real  definition  to  find  a basis  on  various  founda- 
tions. We  regard  the  order  of  the  Commission 
to  be  simply  a revenue  measure  by  which  State 
commerce  is  made  to  contribute  to  the  cost  of 
interstate  commerce.  As  such,  it  seems  clear, 
that  even  the  proponents  of  the  Commission 
theory  would  not  seek  to  uphold  it.  To  strengthen 
this  unconstitutional  and  illegal  basis  the  Com- 
mission urges  that  there  is  discrimination  as 
against  interstate  commerce  by  reason  of  the  fixed 
rates  for  intrastate  commerce.  Here  the  case 
must  finally  rest. 

And  so  the  Commission  treated  the  question 
in  a broad  way.  It  joined  the  Staten  Island  in 
its  order  although  this  road  had  not  even  peti- 
tioned it  for  relief.  It  joined  the  Michigan  Cen- 
tral, Pere  Marquette  and  Baltimore  & Ohio  that 
do  no  intrastate  business  here;  it  joined  the 
Catskill  Mountain  and  Deer  River  which  have 
been  abandoned  and  taken  up;  it  joined  roads 
like  the  Attica  & Arcade  which  run  wholly  within 
one  County  of  the  State;  it  joined'  electric  lines 
like  the  Fonda,  Johnstown  and  Gloversville ; with 
all  its  generosity  it  missed  some  seven  roads 
doing  business  in  the  State  of  far  greater  impor- 
tance than  many  of  those  joined  in  the  order. 
Finally  it  did  all  these  things  to  nearly  all  the 


11 


roads  of  the  State  upon  the  petition  of  only 
eleven  roads  doing  business  in  the  State.  Most 
significant  of  all  the  Commission  refused  to  touch 
the  commutation  fares  because  of  failure  of 
proof.  Surely  there  was  lack  of  courage  here 
for  the  record  on  this  point  certainly  exceeds  the 
references  to  the  Dansville  & Mount  Morris  and 
the  Schoharie  V alley. 

The  point  is  that  the  Commission  made  a dras- 
tic order  that  may  be  sustained  only  if  it  may 
fairly  claim  the  ultimate  in  power. 

The  order  of  the  Commission  required  that 
these  appellants  with  the  other  roads  joined  in 
the  order  should  raise  their  State  rates  on  or 
before  December  18,  1920.  The  order  was  per- 
missive prior  to  that  date  and  so  the  appellants 
acting  in  conjunction  with  the  other  beneficiaries 
decided  upon  November  29th  as  the  date  of 
initiation. 

Other  Litigation . 

In  order  that  the  Court  may  understand  what 
has  heretofore  been  judicially  determined  by 
tribunals1  having  jurisdiction  within  New  York, 
we  will  refer  to  other  cases  tried,  appealed1  and 
pending.  Public  Service  Commission  v.  New 
York  Central  R.  R.,  230  N.  Y.  149,  was  brought 
for  the  purpose  of  compelling  the  railroad  to 
comply  with  the  order  of  the  Public  Service  Com- 
mission and  restore  the  two-cent  fare  between 
Albany  and  Buffalo  after  September  1st.  The 
United  States  District  Court  for  the  Northern 
District  denied  an  injunction  preventing  the  Pub- 
lic Service  Commission  from  maintaining  this 
action.  The  Court  of  Appeals  held1  that  the  two- 


12 


cent  fare  was  restored  on  September  1st  bnt  that 
owing  to  the  order  of  the  Interstate  Commerce 
Commission,  the  case  should  be  remanded  to  the 
Special  Term  for  proof  of  the  effect  of  that  order. 
The  case  was  retried  before  Mr.  Justice  Has- 
brouck  at  Albany  Trial  Term  on  Monday,  Janu- 
ary 3d,  and  remains  undecided.  At  the  same  time 
that  this  action  was  started  another  action 
against  all  the  other  railroads  except  two, 
joined  in  the  order  of  the  Interstate  Com- 
merce Commission  was  begun  in  Albany  county. 
The  order  to  show  cause  was  returnable 
before  Judge  Hasbrouck  at  Kingston  on  De- 
cember 4th.  On  December  18th  the  stay  was 
dissolved  and  an  injunction  pendente  life  was 
denied  without  opinion  as  to  the  trunk  line  rail- 
roads and  as  to  some  others  which  did  a consid- 
erable interstate  business.  The  case  was1  held 
for  a reference  on  the  question  of  how  much 
interstate  business  the  other  defendants  do.  We 
appealed  to  the  Appellate  Division  from  this 
order  denying  a temporary  injunction.  This 
appeal  has  not  been  perfected.  In  the  meantime 
seven  of  the  trunk  line  carriers  enjoined  us  in 
the  Federal  courts  from  further  proceedings  in 
Albany  county.  Six  of  these  orders  are  return- 
able here  and  that  of  the  New  York  Central  in  the 
Southern  District. 

A show  cause  order  was  obtained  against  the 
Long  Island  and  Staten  Island  roads  and  an 
injunction  pendente  lite  granted  by  Judge  Bene- 
dict with  opinion  113  Misc.  700.  This  was  dis- 
solved by  the  Appellate  Division  as  heretofore 
stated. 


13 


The  States,  under  the  Constitution,  have  the  right  to  regu- 
late commerce  within  their  respective  borders.  Congress  has 
not  that  right  and  cannot  acquire  it  except  by  constitutional 
amendment. 

The  right  to  regulate  commerce  is  an  attribute 
of  sovereignty.  It  has  its  roots,  in  our  juris- 
prudence, far  hack  in  the  common  law. 

Lord  Chief  Justice  Hale  (1609-1676)  in  his 
“ de  Portibus  Maris  ” (1  Harg.  77)  wrote: 

“ A man,  for  his  own  private  advantage, 
may,  in  a port  or  town  set  up  a wharf  or 
crane,  and  may  take  what  rates  he  and  his 
customers  can  agree  for  cranage,  wharfage, 
housellage,  pesage ; for  he  doth  no  more  than 
is  lawful  for  any  man  to  do,  viz.,  makes  the 
most  of  his  own  * # # 

If  the  king  or  subject  have  a public  wharf, 
unto  which  all  persons  that  come  to  that  port 
must  come  and  unlade  or  lade  their  goods  as 
for  that  purpose,  because  they  are  the  wharfs 
only  licensed  by  the  queen,  * * * or 

because  there  is  no  other  wharf  in  that  port, 
as  it  may  fall  out  where  a port  is  newly 
erected;  in  that  case  there  cannot  be  taken 
arbitrary  and  excessive  duties  for  cranage, 
wharfage,  pesage,  etc.,  neither  can  they  be 
enhanced  to  an  immoderate  rate;  but  the 
duties  must  be  reasonable  and  moderate, 
though  settled  by  the  king’s  license  and 
charter.  For  now  the  wharf  and  crane  and 
other  conveniences  are  affected  with  a public 
interest,  and  they  cease  to  be  juris  private 
only ; as  if  a man  set  out  a street  in  new  build- 
ing on  his  own  land,  it  is  now  no  longer  bare 
private  interest  but  is  affected  by  a public 
interest.  ’ 9 

and  again  (p.  6) : 

“ No  man  may  set  up  a common  ferry  for 
all  passengers,  without  a prescription,  time 
4 


14 


out  of  mind,  or  a charter  from  the  king.  He 
may  make  a ferry  for  his  own  use  or  the  use 
of  his  family,  hut  not  for  the  common  use  of 
all  the  king’s  subjects  passing  that  way; 
because  it  doth  in  consequent  tend  to  a com- 
mon charge,  and  is  become  a thing  of  public 
interest  and  use,  and  every  man  for  his  pas- 
sage pays  a toll,  which  is  a common  charge, 
and  every  ferry,  ought  to  be  under  public 
regulation,  viz.,  that  it  give  attendance  at 
due  times,  keep  a boat  in  due  order  and  take 
but  reasonable  toll ; for  if  he  fail  in  these,  he 
is  fineable.” 

It  was  probably  not  long  after  this  posthumous 
treatise  saw  the  light  that  there  was  passed 
(1691)  an  act  which  is  of  peculiar  interest  both 
because  of  the  significant  reasons  given  for  its 
passage  and  because  it  contains,  in  its  few  sen- 
tences, practically  all  of  the  essential  elements 
of  our  cumbersome  statutes  delegating  to  public 
utility  commissions  the  rate  fixing  power. 

This  Act  (3rd  William  and  Mary  Chap.  12 
Section  XXIV)  reads,  as  follows : 

“And  whereas  divers  waggoners  and  other 
carriers,  by  combination  amongst  themselves, 
have  raised  the  prices  of  carriage  of  goods  in 
many  places  to  excessive  rates,  to  the  great 
injury  of  trade,  be  it  therefore  enacted  — 
That  the  justices  of  the  peace  of  every  county 
and  other  place  . . . shall  have  power 

and  authority  and  are  hereby  enjoined  and 
required  at  their  next  respective  quarter  or 
general  sessions  after  Easter  day  yearly,  to 
assess  and  rate  the  prices  of  all  land  carriage 
of  goods  whatsoever,  to  be  brought  into  any 
place  or  places  within  their  respective  limits 
and  jurisdictions,  by  any  common  waggoner 
and  carrier,  and  the  rates  and  assessments  so 
made,  to  certify  to  the  several  majors  and 


15 


other  chief  officers  of  each  respective  market 
town  within  the  limits  and  jurisdictions  of 
such  justices  of  the  peace,  to  be  hung  up  in 
some  public  place  in  every  such  market  town, 
to  which  all  persons  may  resort  for  their  in- 
formation ; and  no  such  common  waggoner  or 
carrier  shall  take  for  carriage  of  such  goods 
and  merchandises  above  the  rate  and  prices 
so  set  upon  pain  to  forfeit  for  every  such 
offense  the  sum  of  five  pounds  * * * 

to  the  use  of  the  party  aggrieved.  ’ ’ 

Thus  this  doctrine  of  the  right  of  the  sovereign 
to  regulate  commerce  was  deeply  imbedded  in  the 
common  law  when  in  1776  the  thirteen  colonies 
became  thirteen  “ free  and  independent  states.” 
This  right  to  regulate  commerce,  passed  to  the 
several  independent  colonies  as  an  incident  of 
their  new  found  sovereignty. 

As  it  is  expressed  in  Munn  v.  Illinois,  94  U.  S. 
113,  124. 

“ When  the  people  of  the  United  Colonies 
separated  from  Great  Britain,  they  changed 
the  form,  but  not  the  substance  of  their 
government.  They  retained  for  the  purposes 
of  government  all  the  powers  of  the  British 
Parliament  and  through  their  State  constitu- 
tions, or  other  forms  of  social  compact,  under- 
took to  give  practical  effect  to  such  as  they 
deemed  necessary  for  the  common  good  and 
the  security  of  life  and  property.  ’ ’ 

It  takes  only  a glance  at  the  history  of  the 
Colonies  before  and  during  the  Confederation  to 
l ealize  how  thoroughly  convinced  each  colony  was 
of  its  right  to  regulate  commerce  and  to  what 
extent  the  colonies  went  in  such  regulation  to 
their  mutual  distress.  (See  McMaster:  History 
of  the  People  of  the  United  States,  Yol.  I,  Chap. 


16 


III,  pp.  266,  272  et  seq.  Schouler : History  of  the 
United  States,  Vol.  I,  p.  23.) 

To  obviate  the  difficulties  and  dissensions  that 
bid  fair  to  make  the  colonies  an  easy  prey  to 
foreign  aggression,  (Federalist  No.  42)  and  to 
provide  against  the  laying  of  import  and  export 
duties  against  each  other,  (Federalist  No.  7)  they 
voluntarily  gave  up  a small  part  of  this  inherent 
power  when  they  adhered  to  the  federal  Consti- 
tution. 

The  deed  of  gift  was  in  these  words:  “ The 
Congress  shall  have  power  # * * to  regulate 
commerce  with  foreign  nations;  and  among  the 
several  States,  and  with  Indian  tribes.’ ’ 

As  the  necessity  for  this  gift  of  power  to  the 
central  government  was  probably  the  most  cogent 
factor  in  bringing  about  the  ratification  of  the 
Constitution,  so  it  must  necessarily  be  that  the 
words  that  express  the  gift  contain  the  sense  of 
all  that  it  was  thought  necessary  to  give  and  the 
reservations  of  power  to  the  States  or  to  the 
people  are  peculiarly  applicable  to  every  portion 
of  this  sovereign  power  not  expressly  delegated 
to  the  Congress. 

That  this  is  so  is  quite  evident  from  the  trend 
of  the  decisions1  of  our  highest  court. 

The  Supreme  Court  has  always  maintained  the  rights  of 
the  States  to  regulate  their  own  internal  commerce. 

Chief  Justice  Marshall  laid  down  the  general 
rule  in  the  leading  case  of  Gibbons  v.  Ogden , 9 
Wheat.  1,  195,  where  he  said: 

“ The  genius  and  character  of  the  whole 
government,  seems  to  be,  that  its  action  is  to 
be  applied  to  all  the  external  concerns  of  the 
nation  and  to  those  internal  concerns  which 


17 


affect  the  States  generally;  but  not  those 
which  are  completely  within  the  particular 
State,  which  do  not  affect  other  States,  and 
with  which  it  is  not  necessary  to  interfere, 
for  the  purpose  of  executing  some  of  the  gen- 
eral powers  of  the  government.  The  com- 
pletely internal  commerce  of  a State,  then, 
may  be  considered  as  reserved  for  the  State 
itself.” 

This  same  doctrine  has  been  enunciated  and 
approved  time  and  again.  Thus,  in 

The  Passenger  Cases,  How.  283,  394, 

in  considering  the  question  as  to  the  power  of  a 
State  to  tax  steerage  passengers  entering  from  a 
foreign  country: 

4 ‘ It  is  admitted  that  in  regard  to  the  com- 
mercial, as  to  other  powers,  the  States  cannot 
be  held  to  have  parted  with  any  of  the  attri- 
butes of  sovereignty  which  are  not  plainly 
vested  in  the  Federal  Government  and 
inhibited  to  the  States,  either  expressly  or 
by  necessary  implication.  ’ ’ 

Similarly,  in  one  of  the  Granger  cases,  the 
Court  stated  in  terms  that  might  be  applied  to  the 
Long  Island  Railroad: 

“ This  road  # # * is  situated  within  the 
limits  of  a single  State.  Its  business  is  car- 
ried on  there  and  its  regulation  is  a matter  of 
domestic  concern  ” ( Chicago , Burlington  & 
Quincy  Railroad  v.  Iowa,  94  U.  S.,  155,  163). 

And  about  the  same  time,  in  speaking  of  the 
State’s  right  to  regulate  warehouse  charges,  it 
said : 

y Incidentally  they  may  become  connected 
with  inter-state  commerce,  but  not  necessar- 
ily so.  Their  regulation  is  a thing  of  domes- 

5 


18 


tic  concern,  and  certainly,  until  Congress  acts 
in  reference  to  their  inter-state  relations,  the 
State  may  exercise  all  the  powers  of  Govern- 
ment over  them,  even  though  in  so  doing  it 
may  indirectly  operate  upon  commerce  out- 
side its  immediate  jurisdiction  ” (Munn  v. 
Illinois,  94  U.  S.,  113,  135). 

Again,  the  Court  said  flatly  in  County  of  Mobile 
v.  Kimball , 102  U.  S.  691,  699: 

“ The  States  have  as  full  control  over  their 
purely  internal  commerce  as  Congress  has 
over  commerce  among  the  several  States  and 
with  foreign  nations.” 

Not  long  after  the  States  began  the  institution 
of  regulatory  bodies  the  railroads,  impatient  of 
any  control,  fought  with  the  same  vigor  that 
greeted  the  passage  of  the  Commerce  Act  in  1887, 
the  constitutionality  of  the  new  State  statutes. 
Justice  Waite  said,  in  considering  this  question  in 

Railroad  Commission  Cases,  Stone  v. 
Farmers’  Loan  and  Trust  Co.,  116 
U.  S.  307,  325. 

4 ‘ It  is  now  settled  in  this  court,  that  a state 
has  power  to  limit  the  amount  of  charges  by 
railroad  companies  for  the  transportation  of 
persons  and  property  within  its  own  jurisdic- 
tions unless  restrained  by  some  contract  in 
the  charter,  or  unless  what  is  done  amounts 
to  a regulation  of  foreign  or  interstate  com- 
merce/’ 

Citing 

Railroad  Co.  v.  Maryland,  21  Wall. 
456; 

Chicago,  Burlington  & Quincy  Rail- 
road Co.  v.  Iowa,  94  U.  S.,  155  ; 


19 


Peik  v.  Chicago  anti  Northwestern 
Railway  Co.,  94  U.  S.  164; 

Winona  £ St.  Peter  Railroad  Co.  v. 
Blake,  94  U.  S,  180; 

Ruggles  v.  Illinois,  108  U.  S.  526,  531, 

and  again  (p.  334) : 

“ Every  person,  every  corporation,  every- 
thing within  the  territorial  limits  of  a State 
is  while  there,  'subject  to  the  constitutional 
authority  of  the  State  Government.  Clearly 
under  this  rule,  Mississippi  may  govern  this 
corporation,  as  it  does  all  domestic  corpora- 
tions in  respect  to  every  act  and  everything 
within  the  State  which  is  the  lawful  subject  of 
State  government.  It  may,  beyond  all  ques- 
tion, by  the  settled  rule  of  decision  in  this 
court,  regulate  freights  and  fares  for  business 
done  exclusively  within  the  State,  and  it 
would  seem  to  a matter  of  domestic  concern 
to  prevent  the  company  from  discriminating 
against  persons  and  places  in  Mississippi.” 

See,  also: 

Wabash,  St.  Louis  and  Pacific  Railway 
Co.  v.  Illinois,  118  U.  S.,  557,  564, 
565. 

Sands  v.  Manistee  River  I.  Co.,  123 
U.  S.  288. 

Dow  v.  Biedleman,  125  U.  S.  680'. 

Chicago,  M.  £ St.  P.  R.  Co.  v.  Minne- 
sota, 134  U.  S.  418. 

Chicago  £ Grand  Trunk  Co.  v.  Well- 
man, 143  U.  S.  339. 

Covington  £ Cincinnati  B.  Co.  v.  Ken- 
tucky, 154  U.  S.  204. 

St.  Louis  £ San  Francisco  Ry.  Co.  v. 
Gill,  156  U.  S.  649. 


20 


Texas  & P.  R.  Co.  v.  I.  C.  C .,  162  U.  S. 
197. 

Smyth  v.  Ames , 169  U.  S.  466. 

Reid  v.  Colorado , 187  U.  S.  137,  147. 

Cummings  v.  Chicago , 188  U.  S.  410, 
427. 

Gulf , Colorado  and  Santa  Fe  Ry.  Co. 
v.  Texas , 204  U.  S.  403,  413. 

Southern  Ry.  v.  U.  S.,  222  U.  S.  20,  26. 

Chicago  Milwaukee  and  St.  Paul  Rail- 
way Co.  v.  Iowa,  233  U.  S.  334,  343. 

Pennsylvania  Railroad  Co.  v.  Mitchell 
Coal  & Coke  Co.,  238  U.  S.  251,  253. 

Arkadelphia  Co.  v.  St.  L.  S.  N.  Ry.  Co., 
249  U.  S.  134,  151,  152. 

Public  Utilities  Commission  v.  Lan- 
don,  249  U.  S.  236,  245. 

Southern  Pacific  Co.  v.  Arizona,  249 
U.  S.  472,  477. 

But  perhaps  the  most  striking  example  of  this 
insistence  of  the  Supreme  Court  upon  the  mainte- 
nance of  the  State’s  right  of  regulation  is  found 
in  two  of  the  most  recent  decisions  of  the  Court 
involving  this  question: 

South  Covington  & Cincinnati  St.  Ry. 
Co.  v.  Kentucky,  252  U.  S.  399; 

Cincinnati,  Covington  & Erlang er  Ry. 
Co.  v.  Kentucky,  252  U.  S.  408. 

These  cases  involved  the  validity  of  a State  law 
of  Kentucky  providing  for  separate  cars  on  all 
railroads  for  the  colored  race  or  a separate  com- 
partment for  them.  The  South  Covington  and 
Cincinnati  Street  Railway  Company  owned  and 


21 


controlled  the  Cincinnati,  Covington  and  Erlan- 
ger  Railroad.  The  latter  had  a franchise  from 
the  State  of  Kentucky  and  owned  about  ten  miles 
of  track  in  that  State.  It  owned  no  cars,  however, 
and  its  line  was  operated  by  the  former  road. 
The  business  was  that  of  running  single  truck 
trolley  cars  between  Covington,  Kentucky,  and 
Cincinnati,  Ohio,  at  a 5-cent  fare.  Eighty  per 
cent  of  the  business  was  interstate,  and  Justice 
Day  pointed  out  in  his  dissenting  opinion  that  the 
application  of  the  law  would  be  peculiarly  embar- 
rassing. It  could  not  be  applied  to  interstate 
traffic,  concededly,  so  that  colored  persons  in  that 
traffic,  80  per  cent  of  those  who  rode,  could  ride 
in  the  “ white  ” compartment,  while  only  the 
small  number  in  intrastate  traffic  must  ride  in 
the  “ colored  ” compartment. 

None  the  less,  the  Court  held  that  the  law 
was  applicable,  saying  (p.  403) : 

‘ ‘ In  answer  and  in  resistance  to  the  con- 
clusion of  the  court,  the  railway  company 
contends  that  it  operates  a railway  between 
designated  termini,  one  being  in  Kentucky 
and  the  other  in  Ohio,  that  the  price  of  a fare 
may  be  a single  one  of  5 cents  for  the  com- 
plete trip  in  the  same  car  taken  at  or  termi- 
nating at  the  respective  termini,  and  that 
therefore  the  car  and  passenger  are  neces- 
sarily interstate.  Thus  viewed  they  undoubt- 
edly are,  but  there  are  other  considerations. 
There  was  a distinct  operation  in  Kentucky. 
An  operation  authorized  and  required  by  the 
charters  of  the  companies,  and  it  is  that 
operation  the  act  in  question  regulates,  and 
does  no  more,  and  therefore  is  not  a regula- 
tion of  interstate  commerce.  This  is  the  effect 
of  the  ruling  in  So.  Covington  & C.  St.  Ry  Co. 

6 


22 


v.  Covington , 235  U.  S.,  537.  The  regulation 
of  the  act  affects  interstate  business  inci- 
dentally and  does  not  subject  it  to  u/nreason- 
able  demands 

“ The  cited  case  points  out  the  equal  neces- 
sity under  our  system  of  government , to  pre- 
serve the  power  of  the  States  within  their 
sovereignties  as  to  prevent  the  power  from 
intrusive  exercise  within  the  national  sover- 
eignty, and  an  interurban  railroad  company 
deriving  its  power  from  the  State,  and  sub- 
ject to  obligations  under  the  laws  of  the  State, 
should  not  be  permitted  to  exercise  the 
powers  given  by  the  State,  and  escape  its 
obligations  to  the  State,  under  the  circum- 
stances presented  by  this  record,  by  running 
its  coaches  beyond  the  State  lines.” 

A more  thorough  and  decisive  pronouncement 
in  support  of  State  sovereignty  was  never  made 
by  the  highest  Court.  Certainly  there  can  be  no 
doubt,  in  view  of  this  decision,  that  the  right  of 
the  States  to  regulate  their  own  commerce  still 
stands  as  firm  as  in  the  day  of  Gibbons  v.  Ogden 
(supra). 

The  doctrine  of  the  so-called  Shreveport  cases  has  not 
broadened  materially  the  power  of  Congress  over  purely 
intrastate  commerce. 

Preliminarily,  let  us  examine  the  essential  facts 
which  led  to  interference  with  State-made  rates 
in  these  cases. 

Minnesota  Rate  Cases , 230  U.  S.  352, 

involved  the  2-cent  passenger  rate  law  of  Minne- 
sota and  certain  freight  rates  instituted  by  that 
State.  The  burdens  complained  of  on  interstate 
commerce  arose  from  the  fact  that  the  border 
cities  of  Minnesota  had  an  advantage  over  the 


23 


competing  cities  across  the  border  in  North  Da- 
kota and  Wisconsin,  owing  to  the  fact  that  passen- 
gers and  freight  could  be  transported  between 
points  in  Minnesota  and  the  border  cities  of  that 
State  more  cheaply  than  between  the  same  points 
in  Minnesota  and  the  cities  of  other  States  which 
competed  with  the  border  cities  of  Minnesota 
(p.  383).  It  was  proven  that  there  was  a well- 
defined  course  of  commerce  between  Minnesota 
communities  and  the  Minnesota  border  cities,  and 
between  the  same  communities  and  cities  in  other 
States  competing  with  those  border  cities  (p. 
384).  It  also  appeared  that,  since  the  intrastate 
rates  had  been  reduced  and  as  the  “ necessary, 
immediate  and  direct  effect  ” thereof  (p.  390), 
there  was  a falling  off  in  traffic  to  the  cities  be- 
yond the  borders  of  Minnesota,  an  increase  in 
traffic  to  those  border  cities  and  a practice  grow- 
ing up  of  buying  interstate  tickets  across  the 
State  line  and  repurchasing  at  State  rates  for 
the  journey  in  Minnesota. 

Houston  and  Texas  Ry.  Co.  v.  U . S., 
234  U.  S.  342, 

known  as  the  Shreveport  case,  involved  the  com- 
peting cities  of  Shreveport,  La.,  on  the  one  hand 
and  Dallas  and  Houston,  Texas,  on  the  other  (p. 
346).  Freight  rates  only  were  involved.  There 
was  a through  line  between  Shreveport  and  Dallas 
and  one  between  Shreveport  and  Houston. 
Shreveport  actively  competed  with  Dallas  and 
Houston  for  the  business  of  the  intervening  ter- 
ritory. The  discrimination  complained  of  was 
that  the  State  rates  from  Houston  and  Dallas 
eastward  to  points  in  Texas  were  much  less  than 


24 


those  from  Shreveport  westward  to  the  same 
points.  The  “ difference  was  substantial  and 
injuriously  affected  the  commerce  of  Shreveport  ” 
(p.  346). 

Adams  Express  Co.  v.  Caldwell,  244  U. 
S.  617, 

known  as  the  South  Dakota  case,  involved  the  ex- 
press rates  fixed  by  the  State  of  South  Dakota. 
These  were  lower  than  those  in  40  other  States 
and  40  per  cent  lower  than  interstate  rates.  The 
order  of  the  Commission  directing  the  elimination 
of  the  discrimination  was  made  on  complaint  of 
the  Traffic  Bureau  of  the  Sioux  City  (Iowa)  Com- 
mercial Club,  which  set  up  that  since  the  increase 
in  interstate  rates  it  could  no  longer  compete  with 
cities  in  South  Dakota  for  the  business  in  that 
State  (pp.  619,  620). 

Illinois  Central  Railroad  v.  Public  Util- 
ities Commission,  245  U.  S.  493. 

known  as  the  Illinois  case,  involved  the  validity  of 
the  Illinois  2-cent  passenger  statute.  Interstate 
rates  had  advanced  to  2.5  cents  (p.  495)  and  were 
found  reasonable  by  the  Commission  at  2.4  cents 
(p.  496).  The  complaining  city  was  St.  Louis, 
Missouri,  which  proved  ( Business  Men’s  League 
of  St.  Louis  v.  Atchison,  Topeka  & Santa  Fe  Rail- 
way Co.,  41  I.  C.  C.  13,  19,  20),  that  since  the  in- 
crease in  interstate  rates  from  St.  Louis  to 
Chicago  and  intervening  points,  that  there  had 
been  a marked  falling  off  in  interstate  business 
from  St  Louis  to  such  points  and  a marked  in- 
crease in  intrastate  business  from  East  St.  Louis 
to  those  points  in  Illinois.  Keokuk,  Iowa,  inter- 


25 


vened,  claiming  a similar  falling  off  in  traffic  be- 
tween it  and  points  in  Illinois.  It  appeared  that 
since  the  higher  interstate  rate  went  into  effect, 
large  numbers  of  people  were  crossing  the  State 
line  from  St.  Louis  to  East  St.  Louis,  111.,  and 
there  repurchasing  for  points  in  Illinois  ( Busi- 
ness Men’s  League  of  St.  Louis  v.  A.  T.  & S.  F., 
etc.,  supra,  p.  19).  The  'Commission  found  dis- 
crimination in  favor  of  East  St.  Louis  and  against 
St.  Louis,  as  well  as  in  favor  of  Hamilton  and 
other  Illinois  cities  as  against  Keokuk,  Iowa.  It 
ordered  that  the  discriminations  be  eliminated  so 
far  as  they  existed  on  “ reasonably  direct  lines  ” 
( Business  Men’s  League,  etc.,  v.  A.  T.  & S.  F., 
etc.,  supra,  p.  28),  between  St.  Louis  and  Chicago 
and  between  Keokuk  and  Chicago.  This  order 
was  held  invalid  as  too  indefinite. 

That  all  of  these  cases  forcibly  reaffirmed  the 
doctrine  of  the  right  of  the  States  to  regulate 
their  own  internal  commerce  is  evident  from  a 
study  of  these  decisions.  In  the  Minnesota  Rate 
Cases  {supra)  it  was  said  (p.  417) : 

“ When  Congress,  in  the  year  1887,  enacted 
the  Act  to  Regulate  Commerce  (24  Stat., 
379.  c.  104),  it  was  acquainted  with  the 
course  of  the  development  of  railroad  trans- 
portation and  with  the  exercise  by  the 
States  of  the  rate  making  power.  * * * 

Congress  carefully  defined  the  scope  of  its 
regulation,  and  expressly  provided  that  it 
was  not  to  extend  to  purely  intrastate 
traffic.  In  the  first  section  of  the  Act  to 
Regulate  Commerce  there  was  inserted  the 
following  proviso : 

‘ Provided,  however,  That  the  provisions 
of  this  Act  shall  not  apply  to  the  transporta- 

7 


26 


tion  of  passengers  or  property,  or  to  the 
receiving,  delivering,  storage,  or  handling  of 
property,  wholly  within  one  State,  and  not 
shipped  to  or  from  a foreign  country  from 
or  to  any  State  or  Territory  as  aforesaid. * 

When  in  the  year  1906  (Act  of  June  28, 
1906,  c.  3591,  34  Stat.,  584),  Congress 
amended  the  act  so  as  to  confer  upon  the 
federal  commission  power  to  prescribe 
maximum  interstate  rates,  the  proviso  in 
section  one  was  re-enacted.  Again,  in  1910, 
when  the  act  was  extended  to  embrace  tele- 
graph, telephone  and  cable  companies  en- 
gaged in  interstate  business,  the  proviso  was 
once  more  re-enacted,  with  an  additional 
clause  so  as  to  exclude  intrastate  messages 
from  the  operation  of  the  statute. 

There  was  thus  excluded  from  the  provi- 
sions of  the  act  that  transportation  which 
was  ‘ wholly  within  one  State,  ’ with  specified 
qualification  where  its  subject  was  going  to 
or  coming  from  a foreign  country.” 

And  again  (p.  420) : 

“ The  question  we  have  now  before  us, 
essentially,  is  whether  after  the  passage  of 
the  Interstate  Commerce  Act,  and  its  amend- 
ment, the  State  continued  to  possess  the 
state-wide  authority  which  it  formerly 
enjoyed  to  prescribe  reasonable  rates  for  its 
exclusively  internal  traffic.  * * * Having 

regard  to  the  terms  of  the  Federal  statute, 
the  familiar  range  of  state  action  at  the 
time  it  was  enacted,  the  continued  exercise 
of  state  authority  in  the  same  manner  and 
the  same  extent  after  its  enactment,  and  the 
decisions  of  this  court  recognizing  and  up- 
holding this  authority,  we  find  no  foundation 
for  the  proposition  that  the  Act  to  Regulate 
Commerce  contemplated  interference  there- 
with. ’ 9 


27 


In  the  Shreveport  case  ( Houston  E.  & W.  T. 
Ry.  Co.  v.  U.  S.,  supra)  it  was  said  (p.  357) : 

“ Congress  thns  defined  the  scope  of  its 
regulation  and  provided  that  it  was  not  to 
extend  to  purely  intrastate  traffic.  It  did  not 
underfake  to  authorize  the  Commission  to 
prescribe  intrastate  rates  and  thus  to  estab- 
lish a unified  control  by  the  exercise  of  rate- 
making  power  over  both  descriptions  of 
traffic.  Undoubtedly  — in  the  absence  of  a 
finding  by  the  Commission  of  unjust  discrim- 
ination, intrastate  rates  were  left  to  be  fixed 
by  the  carrier  and  subject  to  the  authority 
of  the  States  or  of  the  agencies  created  by 
the  States.” 

Congress  did  not  attempt  to  enlarge  the  scope  of  the  power 
of  the  Interstate  Commerce  Commission  over  intrastate  rates 
as  is  shown  by  the  legislative  history  of  the  amendments  of 
1920, 

The  effect  of  the  order  of  the  Interstate  Com- 
merce Commission  is1  to  immutably  fix  every  pas- 
senger rate  within  the  State  of  New  York.  The 
Commission  claims  this  power  by  inference  and 
interpretation.  The  power  is  not  expressly 
granted  by  the  amendments  to  the  statute.  If  the 
power  is  found  it  must  be  by  judicial  construc- 
tion, rather  than  in  the  phrases  of  common 
speech.  So  cryptic  is  the  utterance  of  Congress 
that  when  Senator  Cummings  and  Mr.  Esch  were 
soliciting  votes  to  pass  their  bill  in  Congress  they 
were  able  to  successfully  deny  that  the  bill 
granted  the  power  exercised  and  the  vigilance 
of  members  of  Congress  was  unable  to  discern 
the  purpose  found  by  the  bureaucracy  that  now 
magnifies  its  office  and  aggrandizes  its  functions. 

In  1896  when  functionaries  with  a like  lust 
for  power  claimed  the  authority  to  fix  interstate 


28 


rates  by  hermeneutics  as  extravagant  as  applied 
here,  the  Supreme  Court  rebuked  them  and 
remitted  them  to  Congress  for  a clear  and 
unequivocal  expression  of  power.  Mr.  Justice 
Brewer  said  in  Interstate  Commerce  Commission 
v.  Raihvay  Co.,  167  U.  S.  479  at  494: 

“ The  question  debated  is  whether  it 
vested  in  the  commission  the  power  and  duty 
to  fix  rates1;  and  the  fact  that  this  is  a debat- 
able question,  and  has  been  most  strenuously 
and  earnestly  debated,  is  very  persuasive 
that  it  did  not.  The  grant  of  such  a power 
is  never  to  be  implied.  The  power  itself  is1 
vast  and  comprehensive,  so  largely  affecting 
the  rights  of  carrier  and  shipper,  as  well  as 
indirectly  all  commercial  transactions,  the 
language  by  which  the  power  is  given  had 
been  so  often  used  and  was  so  familiar  to  the 
legislative  mind  and  is  capable  of  such 
definite  and  exact  statement,  that  no  just  rule 
of  construction  would  tolerate  a grant  of 
such  power  by  mere  implication.  ” 

The  act  should,  therefore,  not  be  distorted  to 
sustain  the  grant  of  so  far  reaching  a result  as 
the  destruction  of  the  State  rate  making  power. 
Congress  did  not  intend  what  it  did  not  express. 
Indeed,  Congress  carefully  maintained  the  State 
rate  structures. 

The  conclusive  proof  of  this  lies  in  the  fact  that 
the  Act  reenacted  (Title  IV,  Section  400,  par. 
2)  the  clause  stressed  by  Justice  Hughes  in  the 
Minnesota  Bate  Cases  which  states  distinctly 
that 

“ The  provisions  of  this  Act — shall  not 
apply:  (a)  To  the  transportation  of  pas- 


29 


sengers  or  property  or  to  the  receiving, 
delivering,  storage  or  handling  of  property 
wholly  within  one  State,  and  not  shipped  to 
or  from  a foreign  country  from  or  to  any 
place  in  the  United  States  as  aforesaid.” 

It  is  significant  of  the  conclusiveness  of  this 
clause  that  the  railroads  in  their  briefs  before  the 
Interstate  Commerce  Commission  and  the  Com- 
mission in  its  majority  report  omit  all  mention  of 
this  provision  which  is  so  fatal  to  their  conten- 
tions. 

Instead  they  rely  upon  two  other  portions  of 
the  Act  which  they  say  authorizes  the  conclusion 
that  Congress  has  granted  to  the  Interstate 
Commission  the  power  to  increase  all  rates 
in  New  York  State  as  discriminatory.  These  two 
sections  will  be  considered  separately. 

A.  Section  15 -A  of  the  Transportation  Act  does 
not  give  jurisdiction  of  intrastate  rates  to  the  In- 
terstate Commerce  Commission. 

This  section  reads  in  part  as  follows: 

“(2)  In  the  exercise  of  its  power  to  pre- 
scribe just  and  reasonable  rates  the  Commis- 
sion shall  initiate,  modify,  establish  or  adjust 
such  rates  so  that  carriers  as  a whole  (or  as 
a vjhole  in  each  of  such  rate  groups  or  terri- 
tories as  the  Commission  may  from  time  to 
time  designate)  will,  under  honest,  efficient 
and  economical  management  and  reasonable 
expenditures  for  maintenance  of  way,  struc- 
tures and  equipment,  earn  an  aggregate 
annual  net  railway  operating  income  equal, 
as  nearly  as  may  be,  to  a fair  return  upon 
the  aggregate  value  of  the  railway  property 
of  such  carriers  held  for  and  used  in  the 
service  of  transportation:  Provided,  That 
the  Commission  shall  have  reasonable  lati- 


30 


tude  to  modify  or  adjust  any  particular  rate 
which  it  may  find  to  be  unjust  or  unreason- 
able and  to  prescribe  different  rates  for 
different  sections  of  the  country. 

“(3)  The  Commission  shall  from  time  to 
time  determine  and  make  public  what  percent- 
age of  such  aggregate  property  value  consti- 
tutes a fair  return  thereon,  and  such  percent- 
age shall  be  uniform  for  all  rate  groups  or 
territories  which  may  be  designated  by  the 
Commission.  In  making  such  determination 
it  shall  give  due  consideration  among  other 
things  to  the  transportation  needs  of  the 
country  and  the  necessity  (under  honest,  effi- 
cient and  economical  management  of  exist- 
ing transportation  facilities)  of  enlarging 
such  facilities  in  order  to  provide  the  people 
of  the  United  States  with  adequate  trans- 
portation: Provided,  That  during  the  two 
years  beginning  March  1,  1920,  the  Commis- 
sion shall  take  as  such  fair  return  a sum 
equal  to  5%  per  centum  of  such  aggregate 
value,  but  may,  in  its  discretion,  add  thereto 
a sum  not  exceeding  one-half  of  one*  per 
centum  of  such  aggregate  value  to  make  pro- 
vision in  whole  or  in  part  for  improvements, 
betterments  or  equipment,  which,  according 
to  the  accounting  system  prescribed  by  the 
Commission,  are  chargeable  to  capital 
account. 

“ (4)  For  the  purposes  of  this  section,  such 
aggregate  value  of  the  property  of  the 
carriers  shall  be  determined  by  the  Commis- 
sion from  time  to  time  and  as  often  as  may 
be  necessary.  The  Commission  may  utilize 
the  results  of  its  investigation  under  section 
19a  of  this  act,  in  so  far  as  deemed  by  it 
available,  and  shall  give  due  consideration  to 
all  the  elements  of  value  recognized  by  the 
law  o£  the  land  for  rate-making  purposes, 
and  shall  give  to  the  property  investment 


31 


account  of  the  carriers  only  that  considera- 
tion which  under  such  law  it  is  entitled  to 
in  establishing  values  for  rate-making  pur- 
poses. Whenever  pursuant  to  section  19a 
of  this  Act  the  value  for  the  railway  property 
of  any  carrier  held  for  and  used  in  the  serv- 
ice of  transportation  has  been  finally  ascer- 
tained, the  value  so  ascertained  shall  be 
deemed  by  the  Commission  to  be  the  value 
thereof  for  the  purpose  of  determining  such 
aggregate  value. 

“ (5)  Inasmuch  as  it  is  impossible  (without 
regulation  and  control  in  the  interest  of  the 
commerce  of  the  United  States  considered  as 
a whole)  to  establish  uniform  rates  upon  com- 
petitive traffic  which  will  adequately  sustain 
all  the  carriers  which  are  engaged  in  such 
traffic  and  which  are  indispensable  to  the 
communities  to  which  they  render  the  serv- 
ice of  transportation,  without  enabling  some 
of  such  carriers  to  receive  a;  net  railway 
operating  income  substantially  and  unrea- 
sonably in  excess  of  a fair  return  upon  the 
value  of  their  railway  property  held  for  and 
used  in  the  service  of  transportation,  it  is 
hereby  declared  that  any  carrier  which 
receives  such  an  income  so  in  excess  of  a fair 
return,  shall  hold  such  part  of  the  excess,  as 
hereinafter  prescribed,  as  trustee  for,  and 
shall  pay  it  to,  the  United  States/ 9 

Of  course,  the  object  of  this  section  is  fully  re- 
vealed in  this  last  paragraph  (5).  That  this  was 
its  only  purpose  appears  plainly  from  the  words 
of  Congressman  Esch  on  the  final  presentation  of 
the  bill  to  the  House  on  February  28,  1920. 

u I shall  take  up  what  is  known  as  Section 
6.  You  will  find  it  in  section  422  of  the  pend- 
ing bill.  It  provides  for  a rate  of  return  on 
the  valuation  of  railroad  property  either 


32 


taken  as  a whole  or  within  a given  district 
or  territory.  This  provision  wTas  not  in  the 
House  bill.  Against  it  the  House  conferees' 
stood  for  5 or  6 weeks  and  until  the  com- 
promise was  finally  reached.  The  whole 
basis  for  section  6 can  be  found  in  the'se 
words  in  the  bill,  on  page  91,  paragraph  5.” 

He  then  quotes  paragraph  (5)  above  set  out  and 
continues : 

“ The  large  problem  that  has  given  diffi- 
culty to  the  Interstate  Commerce  Commis- 
sion and  to  every  regulatory  body  heretofore 
has  been  the  fixing  of  rates  on  competitive 
traffic  which  will  not  allow  one  road  to  earn 
excessive  income  while  another  road  on  the 
same  rate  does  not  get  a sufficient  income. 
No  formula  has  under  existing  law  yet  been 
discovered  to  meet  that  situation.  You  can 
meet  it  in  two  ways  — by  consolidation  of  all 
carriers  under  one  system,  where  there 
would  not  be  the  problem  of  the  weak  and  the 
strong,  or  under  the  plan  suggested  in  sec- 
tion 422.” 

(' Congressional  Record,  jVol.  59,  p. 

3912.) 

Thus  the  only  object  was  to  solve  the  perplex- 
ing problem  of  uniform  rates  on  competitive  traf- 
fic carried  partly  by  strong  and  partly  by  weak 
roads.  There  is  no  intimation  that  the  section  in 
question  is  intended  to  overrule  the  provision 
above  quoted  prohibiting  interference  by  the  Com- 
mission with  the  transportation  of  passengers 
“ wholly  within  one  State.” 

The  Commission,  however,  entirely  ignores 
this  provision,  bases  its  interference  with  purely 
intrastate  rates  on  an  extraordinary  interpreta- 
tion of  this  section  15-a. 


33 


The  report  (Rates,  Fares  and  Charges  of  N.  Y. 
C.  R.  R.  Co.,  59  I.  C.  C.  290)  states  (pp.  292-293) 
in  effect  that  the  Commission  has  fixed  certain 
rate  groups  and  has  in  “ Increased  Rates  1920  99 

“ authorized  increased  rates designed 

to  enable  the  carriers  as  a whole  99  to  earn  the 
return  prescribed  by  statute. 

It  then  states  (p.  294) : 

‘ 4 Congress  has  directed  that  we  allow  rates 
that  will  yield  in  the  aggregate  a return  of 
5%  or  6 per  cent,  upon  the  value  of  the  rail- 
way property  in  each  of  the  groups.  There 
can  be  no  doubt  of  the  power  of  Congress 
to  devise  and  provide  for  carrying  into  effect 
a plan  for  assuring  to  the  nation’s  interstate 
railroads  a fair  return  upon  the  value  of 
their  property;  and  the  full  control  by  Con- 
gress of  this  matter  is  not  to  be  denied  on 
the  ground  that  the  carriers 9 aggregate 
earnings  are  a commingling  of  intrastate 
revenue  and  interstate  revenue  * * 

The  same  phase  of  the  question  is  somewhat 
similarly  expressed  in  one  of  the  more  recent  of 
these  State  rate  cases. 

Intrastate  Rates  within  Illinois,  59 
I.  C.  C.  350,  364. 

‘ ‘ In  our  decision  in  Increased  Rates,  1920, 
we  fixed  the  increases  in  rates,  fares  and 
charges  necessary  to  comply  with  the  act.  It 
must  be  remembered  that  in  fixing  those 
increases  we  were  acting  within  our  power 
‘ to  prescribe  just  and  reasonable  rates. 9 
The  resulting  rates  therefore  become,  in 
effect,  what  Congress  has  deemed  on  the 
whole  necessary  to  yield  the  carriers  the 
prescribed  return  on  the  value  of  their 
property. 

9 


34 


“ It  is  further  urged  that  in  Increased 
Bates,  1920,  we  did  not  find  the  value  of  any 
railroad  property  in  the  State  of  Illinois  or 
elsewhere  in  the  eastern  or  western  groups 
as  designated  in  that  report.  We  were 
directed  to  prescribe  rates  so  that  in  the 
aggregate  they  would  yield  a certain  return, 
as  nearly  as  may  be,  ‘ upon  the  aggregate 
value  of  the  railway  property  of  such 
carriers  held  for  and  used  in  the  service  of 
transportation.  ’ We  understand  the  inter- 
state commerce  act  to  require  us  to  determine 
upon  a valuation  for  the  total  property  of  the 
carriers  and  not  for  the  property  that  might 
by  some  necessarily  arbitrary  method  or 
formula  be  assigned  to  interstate  traffic,  and 
that  is  the  course  we  followed  in  arriving 
at  the  estimated  value  used,  in  Increased 
Rates,  1920. 

“ In  that  case,  conformably  to  the  act,  in 
the  exercise  of  our  power  to  prescribe  just 
and  reasonable  rates,  we  determined  the 
increased  fares  that  were  necessary  in  order 
that  the  passenger  traffic  should  contribute 
its  proper  proportion  to  a fair  return  on  the 
aggregate  property  value.  If,  without  good 
reason,  the  fares  within  a state  are  lower 
than  those,  authorized  and  established  for 
interstate  application,  intrastate  passenger 
traffic  will  not  contribute  its  just  share  to 
the  passenger  revenues  of  the  carriers,  and 
the  carriers  may  not  earn  the  statutory 
return  without  further  increases  in  the  trans- 
portation charges  on  other  traffic,  including 
interstate  commerce,  thus  unjustly  discrimi- 
nating against  such  commerce.” 

In  other  words,  the  Commission  has  attempted 
completely  to  override  the  explicit  provision 
against  interference  with  “ the  transportation  of 
passengers  or  property  wholly  within  one  State  ” 


35 


by  a broad  construction  of  the  Congressional 
mandate  to  fix  rates  for  “ carriers  as  a whole.’ ’ 
Obviously  inconsistencies  should  be  reconciled.  It 
is  not  proper  to  disregard  one  section  because  an- 
other is  inconsistent  with  it. 

And  what  is  there  extraordinary  or  unusual 
about  a mandate  to  consider  the  entire  valuation 
of  all  the  railroads  of  the  country!  Why  should 
such  a natural  provision  suddenly  be  seized  upon 
to  overthrow  the  Constitutional  rights  of  the 
States ! 

For  years,  under  section  19-a  of  the  Interstate 
Commerce  Act  the  Commission  has  been  at  work 
ascertaining  a valuation  of  the  railroads  as  a 
whole.  Yet  that  section  was  never  brought  out 
as  an  excuse  for  interfering  with  intrastate  rates. 

Indeed,  how  can  the  allocation  between  prop- 
erty devoted  to  interstate  and  intrastate  com- 
merce be  properly  made  unless  the  entire  property 
be  preliminarily  valued!  In  the  Minnesota  Rate 
Cases  ( supra  at  p.  433)  with  its  tedious  and  ex- 
haustive analysis  of  the  property  devoted  to  in- 
terstate traffic  Justice  Hughes  necessarily  took  as 
a starting  point  the  entire  value  of  the  railroads 
involved.  This  must  be  so  in  any  case  involving 
interstate  rates  on  a railroad  carrying  both  kinds 
of  traffic.  It  may  not  be  validly  argued  from 
such  a provision  that  the  power  of  the  Commis- 
sion over  intrastate  rates  has  been  extended  by 
a provision  to  value  the  railroad  properties  as  a 
whole. 

Of  course,  it  is  a difficult  thing,  where  some 
roads  are  concerned,  to  make  the  calculations  nec- 
essary for  the  allocations  of  expenses  and  prop- 
erty between  intrastate  and  interstate  traffic. 


36 


But  mere  difficulty  in  the  problem  assigned  them 
does  not  excuse  public  officers  from  doing  their 
duty.  Nor  does  it  lead  to  the  assumption  that 
Congress  meant  to  do  what  it  had  no  power  to 
do  under  the  Constitution  and  what  there  is  no 
scintilla  of  evidence  in  the  Act  in  question  that  it 
intended  to  do. 

The  reasonable  construction  of  the  Act  as  a 
whole  evidently  is  that  the  Interstate  Commerce 
Commission  shall  consider,  in  carrying  out  its 
mandate,  the  entire  property  of  the  railroads, 
but  its  power  to  fix  rates  is  limited , as  always , to 
interstate  rates. 

It  is  to  be  assumed  that  the  States  must  allow 
rates  which  will  yield  a fair  rate  of  return  to  the 
carriers  upon  the  property  engaged  in  intrastate 
commerce.  The  States  may  allow  eight  (8)  per 
cent,  they  may  allow  ten  ( 10)  per  cent.  They  cer- 
tainly could  not  allow  less  than  5%  or  6 per  cent 
without  running  the  imminent  risk  of  having  their 
rates  declared  confiscatory  under  the  14th  amend- 
ment. 

If  the  Interstate  Commerce  Commission  is 
bound  by  law  to  allow  a return  of  6 per  cent  upon 
the  property  engaged  in  interstate  commerce  and 
if  the  States  are  bound  by  law  to  allow  a similar 
return  upon  the  carriers  ’ property  engaged  in  in- 
trastate commerce,  how  can  the  u carriers  as  a 
whole  ” fail  to  receive  the  return  contemplated? 
Plainly  they  cannot.  The  exact  intention  of  Con- 
gress would  be  carried  out  and  the  Constitutional 
rights  of  the  States  maintained. 

By  the  report  and  order  of  the  Commission,  it 
does  not  appear  in  any  way  that  the  rates  prevail- 
ing in  New  York  yield  less  than  a 6 per  cent  re- 


37 


turn.  Indeed,  the  fact,  recited  in  the  report 
(p.  291)  that  the  railroads  applied  for  increases 
to  the  Public  Service  Commission  and  that  the  ap- 
plication was  denied,  conclusively  negatives  any 
assumption  that  present  rates  will  yield  less  than 
6 per  cent,  so  far  as  this  proceeding  is  concerned. 
It  not  having  been  found,  either  by  the  Commis- 
sion, the  Legislature  or  the  Courts,  that  present 
rates  yield  less  than  an  adequate  return,  it  must 
be  assumed  that  they  do  yield  such  return.  That 
being  the  case,  the  additional  revenue  of  $11,- 
000,000  to  $12,000,000  which  this  order  is  designed 
to  procure  for  the  railroads  will  really  be  a tax 
upon  intrastate  commerce  for  the  benefit  of  inter- 
state. It  is  a declaration  that  the  defendants  here 
must  from  its  intrastate  commerce  earn  more 
than  a fair  return  in  order  to  make  up  for  some 
deficiency  of  another  road  in  interstate  commerce. 

Indeed,  the  weakness  of  relying  solely  upon 
this,  which  may  be  called  the  ‘ ‘ financial  burden  ’ ’ 
phase  of  the  alleged  discrimination,  is  fully  recog- 
nized by  the  Commission  itself.  It  constantly 
leaves  this  phase  and  runs  to  the  second  phase 
which  will  now  be  considered. 

This  second  phase  may  be  designated  the 
Shreveport  phase  of  the  alleged  discrimination, 
relying  upon  Paragraphs  3 and  4 of  Section  416 
of  the  Transportation  Act. 

B.  The  only  purpose  of  Paragraphs  3 and  4 of 
Section  416  of  the  Transportation  Act  was  to  put 
into  the  form  of  law  the  decisions  of  the  Supreme 
Court  in  the  Shreveport  Cases . 

These  sections  read  as  follows: 

“ (3)  Whenever  in  any  investigation 
under  the  provisions  of  this  Act,  or  in  any 

10 


38 


investigation  instituted  upon  petition  of  the 
carrier  concerned,  which  petition  is  hereby 
authorized  to  be  filed,  there  shall  be  brought 
in  issue  any  rate,  fare,  charge,  classification, 
regulation,  or  practice,  made  or  imposed  by 
authority  of  any  State,  or  initiated  by  the 
President  during  the  period  of  Federal  con- 
trol the  Commission,  before  proceeding  to 
hear  and  dispose  of  such  issue,  shall  cause 
the  State  or  States  interested  to  be  notified 
of  the  proceeding.  The  Commission  may 
confer  with  the  authorities  of  any  State  hav- 
ing regulatory  jurisdiction  over  the  class  of 
persons  and  corporations  subject  to  this  Act 
with  respect  to  the  relationship  between  rate 
structures  and  practices  of  carriers  subject 
to  the  jurisdiction  of  such  State  bodies  and 
of  the  Commission ; and  to  that  end  is  author- 
ized and  empowered,  under  rules  to  be  pre- 
scribed by  it,  and  which  may  be  modified 
fom  time  to  time,  to  hold  joint  hearings 
with  any  such  State  regulating  bodies  on  any 
matters  wherein  the  Commission  is  empow- 
ered to  act  and  where  the  rate-making  author- 
ity of  a State  is  or  may  be  affected  by  the 
action  taken  by  the  Commission.  The  Com- 
mission is  also  authorized  to  avail  itself  of 
the  co-operation,  services,  records,  and  facili- 
ties of  such  State  authorities  in  the  enforce- 
ment of  any  provision  of  this  Act. 

“(4)  Whenever  in  any  such  investigation 
the  Commission , after  full  hearing,  finds  that 
any  such  rate,  or  fare,  or  charge,  classifica- 
tion, regulation,  or  practice  causes  any  undue 
or  unreasonable  advantge,  preference,  or 
prejudice  as  between  persons  or  localities  in 
interstate  commerce  on  the  one  hand  and 
interstate  or  foreign  commerce  on  the  other 
hand,  or  any  undue , unreasonable,  or  unjust 
discrimination  against  interstate  or  foreign 
commerce,  which  is  hereby  forbidden  and 


39 


declared  to  be  unlawful  it  shall  prescribe 
the  rate , fare , or  charge,  or  the  maximum 
or  minimum,  or  maximum  and  minimum, 
thereafter  to  be  charged,  and  the  classifica- 
tion, regulation,  or  practice  thereafter  to  he 
observed,  in  such  manner  as,  in  its  judgment, 
will  remove  such  advantage,  preference,  pre- 
judice, or  discrimination . Such  rates,  fares, 
charges , classifications,  regulations,  and 
practices,  shall  be  observed  while  in  effect 
by  the  carriers  parties  to  such  proceeding 
affected  thereby,  the  law  of  any  State  or  the 
decision  or  order  of  any  State  authority  to 
the  contrary  notwithstanding.” 

The  Senate  bill  introduced  by  Senator  Cum- 
mins on  December  8,  1919,  and  the  House  bill,  in- 
troduced by  Congressman  Esch,  November  11, 
1919,  as  well  as  the  conference  measure  finally 
passed,  were  similar  in  phraseology  and  identical 
in  intent. 

On  December  4,  1919,  'Senator  Cummins  ex- 
plained his  bill  to  the  Senate  at  length.  As  to 
these  two  sections  he  said: 

“ I call  attention  next  to  section  43  which 
presents  also  a long  standing  controversy 
and  a most  important  one,  and  upon  which 
Senators  will  have,  I am  sure,  decided 
opinions.  * * * 

For  years  there  has  been  a conflict  between 
the  jurisdiction  of  the  Federal  Government 
and  the  jurisdiction  of  the  State  Govern- 
ments with  regard  to  the  adjustment  of 
rates.  All  of  you  know  that  the  Constitu- 
tion of  the  United  States*  confers*  upon  Con- 
gress the  authority  to  regulate  commerce 
among  the  states  and  with  foreign  nations. 
Obviously  this  authority  is  limited  to  the 
regulation  or  control  of  interstate  commerce 
and  matters  that  are  inseparably  connected 


40 


with  or  incident  to  interstate  commerce . The 
Supreme  Court  of  the  United  States  has  had 
occasion  in  at  least  three  separate  cases  to 
discuss  the  subject. 

Most  of  you,  I am  sure,  are  familiar  with 
what  is  known  as  the  Shreveport  decision  99 
(see  Congressional  Record,  Vol.  59,  p.  143). 

He  then  described  in  a general  way  the  Shreve- 
port decision,  the  Minnesota  Rate  Cases  and  the 
Illinois  situation  then  in  litigation. 

He  proceeded  to  say: 

“ The  committee  has  attempted  simply  to 
express  the  decisions  of  the  Supreme  Court 
of  the  United  States . We  have  not  atempted 
to  carry  the  authority  of  Congress  beyond 
the  exact  point  ruled  by  the  Supreme  Court 
in  the  cases  to  which  1 have  referred;  and  the 
only  thing  we  have  done  in  the  matter  has 
been  to  confer  upon  the  Interstate  Commerce 
Commission  the  authority  to  remove  the  dis- 
crimination, when  established  in  a proper 
proceeding  before  that  body — an  authority 
which  it  does  not  now  have  99  (see  Congres- 
sional Record,  Vol.  59,  No.  4,  p.  143). 

Similarly,  Congressman  Esch  spoke  of  the  pur- 
pose of  his  bill  when  explaining  it  to  the  House 
on  November  11,  1919: 

“ We  also  provide  for  the  enactment  into 
law  of  what  is  popularly  hnown  as  the  decis- 
ions of  the  Supreme  Court  in  the  Shreveport 
cases . Where  intrastate  rates  constitute  an 
undue  burden,  advantage,  preference,  or 
prejudice  against  interstate  rates,  such  rates 
are  declared  to  be  unlawful.  We  have  incor- 
porated into  law  the  decision  of  the  court . 
When  by  reason  of  the  low  level  of  the  intra- 
state rates  an  undue  burden  is  cast  upon  the 
interstate  traffic  the  citizens  and  the  shippers 
of  other  states  are  compelled  to  pay  higher 


41 


interstate  freight  rates  than  they  wonld  have 
had  to  pay  had  that  State  enacted  or  pnt  in 
force  and  effect  proper  intrastate  rates  ” 
(Vol.  58,  Cong.  Record,  p.  8317). 

Moreover  this  is  borne  out  by  the  testimony  of 
Commissioner  Clark  before  the  House  Committee. 

It  is  quite  natural  to  suppose  that  when  Con- 
gressman Esch  and  Senator  Cummins  were  draw- 
ing their  bills  they  should  go  for  suggestions  to 
Commissioner  Clark,  the  Commissioner  who  had 
been  longest  in  office  and  who  was  recognized  na- 
tionally as  an  expert  on  these  matters  in  the  coun- 
try. It  must  be  remembered  that  in  the  Illinois 
passenger  case  ( Illinois  Central  R.  R.  v.  Public 
Utilities  Commission,  245  U.  S.  493),  the  Supreme 
Court  had  held  in  1918  that  an  order  of  the  Inter- 
state Commerce  Commission  similar  to  the 
Shreveport  order  was  too  indefinite  for  enforce- 
ment. Undoubtedly  and  quite  properly  this  fact 
influenced  Commissioner  Clark  in  his  desire  to 
make  more  definite  and  certain  the  Commission’s 
power  as  it  had  already  been  announced  by  the 
Supreme  Court  and  to  facilitate  the  exercise  of 
that  power. 

When  called  as  first  witness  before  the  Com- 
mittee, he  stated: 

‘ ‘ I doubt  if  it  is  necessary,  Mr.  Chairman, 
for  me  to  detail  much  of  the  history  of  this 
situation  as  it  has  developed  from  the 
original  decisions  and  reports  of  the  commis- 
sion in  the  so-called  Shreveport  case,  and  the 
decision  of  the  Supreme  Court  sustaining 
the  Commission. 

The  law  as  it  now  stands  and  as  it  is  inter- 
preted by  the  commission  and  by  the 
Supreme  Court  authorizes  the  commission  to 

11 


42 


require  the  removal  of  undue  preference  or 
undue  prejudice  and  to  correct  the  differ- 
ences between  the  levels  of  State  and  inter- 
state rates,  in  doing  which  it  must  prescribe 
the  reasonable  maximum  interstate  rates,  and 
thus,  by  a roundabout  process,  it  results  that 
the  commission  fixes  the  level  of  the  maxi- 
mum interstate  rates  and  requires  the 
removal  of  undue  preference  and  undue  prej- 
udice found  to  exist  under  the  States  rates, 
which  gives  the  carrier  authority  to  increase , 
if  necessary , or  if  it  so  elects , the  State  rates 
to  the  level  of  the  interstate  rates  as  found 
reasonable  99  (Hearings  before  Committee  of 
the  House  on  Interstate  and  Foreign  Com- 
merce, Hearings  on  H.  R.  4378,  Vol.  I, 

p.  26). 

See  also  his  further  testimony 

Hearings  before  House  Committee 
( supra ),  pages  27,  28,  68-70,  110, 
111. 

He  later  summed  up  his  opinion  as  to  whether 
the  powers  of  the  Commission  would  be  enlarged 
by  this  provision,  when  the  following  colloquy 
took  place  between  him  and  Mr.  Sanders  of 
Indiana : 

“ Mr.  Sanders  of  Indiana:  Mr.  Commis- 
sioner, I wish  you  would  be  kind  enough  to 
state  for  the  record  the  power  that  was 
recognized  in  the  commission  by  the  Shreve- 
port case. 

Mr.  Clark:  The  power  to  require  the  re- 
moval of  undue  prejudice  against  interstate 
shipment  resulting  from  the  application  of 
intrastate  traffic  of  a scale  of  rates  prescribed 
by  the  State  Commission  and  the  mainte- 
nance of  higher  rates  on  interstate  traffic 
over  the  same  line  for  corresponding  dis- 
tances and  under  substantially  similar  cir- 
cumstances and  conditions. 


43 


Mr.  Sanders  of  Indiana : Section  13  of  this 
act,  which  proposes  to  amend  Section  13  of 
the  original  act,  deals  with  that  question  of 
additional  power  which  Section  13  gives  the 
Interstate  Commerce  Commission. 

Mr.  Clark:  I do  not  think  that  it  gives  us 
any  more  power  under  the  law.  1 do  not 
think  it  expands  or  contracts  the  application 
of  the  terms  of  the  law  or  the  commission’ s 
power  thereunder , but  it  does  define  a rela- 
tionship and  outline  a procedure  that  we 
hope  will  operate  to  minimize  the  number  of 
instances  in  which  undue  prejudice  will  exist, 
and  to  simplify  the  removal  of  it  where  it 
may  be  found  to  exist.”  (Hearings  before 
Committee  [supra],  Vol.  I,  p.  110). 

Here  then  we  have  the  opinions  of  the  three 
persons  best  qualified  to  speak  as  to  the  purpose 
of  these  sections  of  the  statute.  And  they  are 
unanimous  that  there  was  no  intent  to  broaden 
the  powers  of  the  Commission  beyond  those  it 
had  already  been  found  to  have  by  the  Supreme 
Court  decisions  in  the  Shreveport  and  similar 
cases. 

In  his  opening  statement  Mr.  Clark  called  at- 
tention to  the  words  “ except  as  expressly  pro- 
vided in  section  13  thereof,”  in  the  proviso 
(Report  of  Hearings  on  H.  R.  4378,  page  11)  and 
read  the  portion  of  the  amendment  to  paragraph 
13  containing  the  “ undue  burden  ” provision 
(Report  of  Hearings,  page  26).  On  his  appear- 
ance at  the  close  of  the  hearing  he  was  asked  to 
give  an  illustration  ‘ ‘ of  what  would  be  a burden 
upon  interstate  commerce  as  that  term  is  used.” 
He  replied:  “An  unreasonably  and  unduly  low 
level  of  rates  within  the  State  which  were  not  at 
the  same  time  alleged  to  be  or  shown  to  be  un- 


44 


duly  preferential  of  or  unduly  prejudicial  against 
any  particular  person  or  community.’’  (Report 
of  Hearings,  page  2964.) 

This  proposed  extension  of  power  was  strongly 
opposed  by  the  rate  regulating  authorities  of  the 
several  States.  The  National  Association  of 
Railway  and  Utilities  Commissioners,  through  its 
General  Solicitor,  Mr.  Elmquist,  made  the  fol- 
lowing statement  concerning  the  same  at  the 
hearing  before  the  House  Committee: 

44  It  is  our  judgment  that  the  introduction 
of  the  words  4 4 undue  burden  upon  interstate 
or  foreign  commerce  ” introduces  a new  ele- 
ment into  the  rate  structure  of  the  Federal 
act,  and  it  may  ultimately  give  to  the  Inter- 
state Commerce  Commission  authority  to  de- 
prive the  states  of  the  Union  of  any  power 
whatever  over  intrastate  commerce.  * * * 
A few  years  ago  the  Supreme  Court  had  be- 
fore it  the  Illinois  Passenger  Rate  Case. 
Under  the  statute  of  that  state,  the  passen- 
ger rates  were  2 cents  per  mile.  The  Inter- 
state Commerce  Commission  had  approved 
interstate  rates  based  upon  2 % cents  per 
mile.  There  was  a complaint  alleging  dis- 
crimination between  the  passenger  rates  to 
St.  Louis  and  East  St.  Louis  and  Keokuk 
and  Hamilton,  as  well  as  Chicago.  The 
Interstate  Commerce  Commission  heard  that 
case  and  made  an  order,  in  which  it  found 
that  the  rates,  state  and  interstate,  were  un- 
duly discriminatory  and  resulted  in  undue 
prejudice  and  advantage,  and  asked  the  car- 
riers to  remove  that  discrimination. 

In  that  case  the  commission  writing  the 
decision  found  that  the  2-cent  rate  was  a 
burden  upon  interstate  commerce.  So,  the 
Interstate  Commerce  Commission  did  say 
that  those  rates  were  a burden  upon  inter- 
state commerce.  The  Supreme  Court  ig- 


45 


nored  that  particular  finding,  hut  held  to  a 
finding  of  the  particular  discrimination  be- 
tween communities.  If  the  word  “ burden  ” 
had  been  a part  of  the  statute  at  that  time, 
it  may  not  be  far-fetched  to  assume  that  the 
commission  would  have  said  that  those  rates 
were  a burden  upon  interstate  commerce  and 
the  court  would  have  said  that  the  commis- 
sion’s findings  were  within  the  law.  * * # 

It  is  inconceivable  to  me,  gentlemen,  that  this 
committee  will  attempt  in  an  indirect  way  to 
take  from  the  states  that  power  which  they 
have  reserved  unto  themselves.  I fear  that 
that  will  be  the  result  of  those  words  in  the 
statute.”  (Report  of  Hearings,  page  1622.) 

The  House,  however,  did  not  strike  out  the 
objectionable  words,  and  the  Association  filed 
with  the  Conference  Committee  a memorandum, 
in  which  the  provision  was  further  discussed,  in 
part  as  follows: 

“It  is  provided  that  whenever  the  Inter- 
state Commerce  Commission  shall  investi- 
gate 1 any  rate,  fare,  charge,  classification, 
regulation,  or  practice  made  or  imposed  by 
authority  of  any  state  * * * the  Com- 
mission shall  have  authority  * * * to 

make  findings  and  orders  * * # to  remove 
# * any  undue  burden  upon  interstate  or 

foreign  commerce  * * #.  The  law  of  any 
state  or  the  decision  or  order  of  any  state 
authority  to  the  contrary  notwithstanding.’ 

If  this  provision  shall  become  law  it  will 
operate  to  deprive  the  state  Commissions  of 
their  power  to  make  with  final  effect  any 
rate , service  or  other  regulatory  order . 

We  make  this  subject  the  first  for  discus- 
sion in  this  memorandum  because  we  deem 
it  of  most  vital  importance  to  the  state  Com- 
missions and  to  the  people  of  the  states 
whose  interest  they  represent. 

12 


46 


The  question  involved  is  whether  Congress 
desires  to  preserve  the  powers  of  the  state 
Commissions  or  to  destroy  them.” 
(Memorandum  of  National  Association  of 
Ry.  and  Pub.  Utilities  Commissioners,  page 
2.) 

The  Conference  Committee  struck  out  from 
said  paragraph  4 the  words  “ undue  burden  ” 
and  wrote  in  their  place  “ undue,  unreasonable 
or  unjust  discrimination,”  thereby  making  the 
first  part  of  the  paragraph  nothing  more  than  a 
re-statement  of  the  effect  of  'section  3 of  the  Act, 
and  leaving  untouched  the  reserved  power  of  the 
States  over  rates  on  traffic  within  their  own 
borders,  other  than  as  such  power  was  before 
limited  by  said  section  3.  This  made  the  words 
“ except  as  provided  in  section  13  thereof,”  pro- 
posed to  be  put  into  the  proviso  in  section  1,  un- 
necessary and  inappropriate,  and  the  reservation 
was  re-enacted  in  the  words  used  in  the  Act  when 
originally  passed,  as  follows: 

“ Sec.  1.  # # # (2)  The  provisions  of 

this  Act  * # * shall  not  apply  — 

(a)  To  the  transportation  of  passengers 
or  property  * * # wholly  within  one  State 
and  not  shipped  to  or  from  a foreign  country 

from  or  to  any  place  in  the  United  States. 
# * # # 


When  Congress  did  this  it  had  before  it  the 
opinions  of  the  Supreme  Court  interpreting  the 
Act  to  Eegulate  Commerce.  It  knew  that  in  the 
Minnesota  Rate  Cases  opinion  the  court  had  said 
that  the  proviso  in  section  1 was  intended  by  Con- 
gress to  define  the  “ scope  of  its  regulation.” 
And  ijt  enacted  the  proviso  just  as  it  'stood  in  the 
original  Act. 


47 


It  is  a rule,  too  elementary  to  require  the  cita- 
tion of  authorities,  that  when  a legislative  body 
re-enacts  a statute  or  part  of  a statute  which  has 
received  judicial  construction,  it  adopts  the  con- 
struction which  has  been  placed  upon  it.  Accord- 
ingly, by  the  re-enactment  of  this  reservation 
Congress  emphasized  its  intent  not  to  encroach 
upon  the  domain  of  intrastate  traffic  beyond  the 
extent  to  which  it  had  originally  done  so  indi- 
rectly by  the  prohibition  against  discrimination 
in  section  3,  now  re-affirmed  in  paragraph  4 of 
section  13. 

It  is  impossible  to  read  the  Act  as  it  finally 
passed,  in  the  light  of  its  legislative  history,  and 
in  the  light  of  the  most  cardinal  rules  of  construc- 
tion, and  entertain  doubt  that  Congress  on  this 
particular  point  accepted  the  view  of  those  who 
spoke  for  the  preservation  of  State  authority, 
and  determined  to  withhold  from  the  Commis- 
sion the  power  for  which  it  asked.  By  design 
Congress  limited  the  power  of  the  Commission 
to  the  correction  of  discriminatory  situations  in- 
juriously affecting  persons  and  localities'.  We  do 
not  believe  that  the  eager  insistence  of  carriers 
will  lead  this  Court  to  attempt  to  override  the 
will  of  Congress  by  reading  into  the  Act  some- 
thing which  Congress  deliberately  left  out. 

An  incident  which  occurred  in  the  course  of  the 
consideration  of  the  bill  in  Congress  is  most 
significant  as  indicating  the  definite  intention  of 
Congress  to  restrain  the  Commission  from  inva- 
sion of  the  State  field  of  regulation.  In  the  Esch 
Bill,  when  introduced,  in  place  of  the  words  11  the 
Commission  shall  have  authority  * * * to 

make  * * * orders  * # # to  remove  any 


48 


undue  or  unreasonable  advantage,  preference  or 
prejudice  as  between  persons  or  localities  in  in- 
trastate commerce  on  the  one  band  and  interstate 
or  foreign  commerce  on  the  other  hand,”  ap- 
peared the  words  “ the  Commission  shall  have 
the  authority  * # * to  make  * * * orders 

* * * to  remove  any  undue  preference  or 

prejudice  as  between  persons  or  localities  in 
State  and  interstate  and  foreign  commerce'.” 
Mr.  L.  B.  Boswell  made  inquiry  by  letter  of 
Chairman  Esch  as  to  whether  this  language  was 
intended  to  extend  the  power  of  the  Interstate 
Commerce  Commission  to  and  over  rates  apply- 
ing as  between  persons  or  localities  wholly  intra- 
state. The  letter  was  referred  to  Chairman  Clark 
of  this  Commission,  and  his  reply  was  made  part 
of  the  record.  He  said: 

“ Mr.  Boswell  asks  for  interpretation  of 
the  language  occurring  in  lines  18  to  23  on 
page  21  of  the  bill  and  inquires  whether  it  is 
intended  to  confer  upon  the  Interstate  Com- 
merce Commission  jurisdiction  of  complaints 
of  undue  preference  or  prejudice  as  between 
parties  or  places  within  one  State.  In  other 
words,  does  it  confer  upon  the  commission 
jurisdiction  of  complaints  of  undue  prefer- 
ence or  prejudice  wholly  intrastate?  The 
answer  to  this  is,  of  course,  u no.”  The 
language  in  question  refers  only  to  undue 
preference  or  prejudice  as  between  persons 
or  localities  in  state  commerce  on  the  one 
hand  and  interstate  commerce  or  foreign 
commerce  on  the  other  hand,  and  I do  not 
think  there  is  any  probability  that  it  will  be 
misunderstood  or  misconstrued.” 

While  Chairman  Clark  had  expressed  the 
opinion  that  the  language  originally  carried  in 


49 


the  bill  could  not  be  construed  to  extend  the 
power  of  the  Commission  to  deal  with  discrimi- 
nations existing  between  intrastate  rates,  Con- 
gress desired  to  exercise  extreme  care  on  that 
point,  and  adopted  the  concise  and  explicit  words 
‘ ‘ between  * * * intrastate  commerce  * * * 
on  the  one  hand  and  interstate  and  foreign  com- 
merce on  the  other  hand,  ’ ’ which  Chairman  Clark 
had  used  in  his  letter  to  negative  any  such  con- 
struction. 

We  take  it  to  be  established  then  that  nothing 
contained  in  paragraph  4 in  any  way  enlarges  the 
power  of  the  Commission  beyond  what  it  was 
before  that  paragraph  was  added  to  the  Act, 
except  only  with  respect  to  its  power  and  duty  to 
prescribe  rates  to  be  observed  for  the  purpose  of 
removing  discriminations  found. 

The  order  of  the  Interstate  Commerce  Commission  is 
unlawful  and  unconstitutional  on  its  face. 

The  rule  of  construction  laid  down  by  the  Su- 
preme Court  in  the  Illinois  passenger  case,  the 
last  of  the  so-called  Shreveport  cases,  must  of 
course  be  the  guide.  There  the  Court  said, 
245  U.  S.  493  at  510 : 

“ In  construing  federal  statutes  enacted 
under  the  power  conferred  by  the  commerce 
clause  of  the  Constitution,  the  rule  is  that  it 
should  never  be  held  that  Congress  intends 
to  supercede  or  suspend  the  exercise  of  the 
reserved  powers  of  State,  even  where  that 
may  be  done,  unless,  and  except  so  far  as,  its 
purpose  to  do  so  is  clearly  manifested.  Reid 
v.  Colorado,  187  U.  S.  137,  148;  Cummings  v. 
Chicago , 188  U.  S.  410,  430 ; Savage  v.  Jones , 


50 


225  U.  S.  501 ; Missouri , Kansas  & Texas  Ry. 
Co.  v.  Harris,  234  U.  S.  412,  419.  This  being 
true  of  an  act  of  Congress,  it  is  obvious  that 
an  order  of  a subordinate  agency,  such  as  the 
Commission,  should  not  be  given  precedence 
over  a state  rate  statute  otherwise  valid,  un- 
less, and  except  so  far  as  it  conforms  to  a 
high  standard  of  certainty/ ’ ( Illinois  Cen- 

tral R.  R.  v.  P.  U.  C.,  245  U.  S.  493,  510.) 

The  order  then  must  be  strictly  construed  and 
we  must  search  its  provisions  and  the  report  of 
the  Commission  upon  which  it  is  based,  to  form 
an  opinion  upon  its  validity. 

The  Commission’s  report  expressly  admits  that 
under  these  “ Shreveport  ” cases,  its  power  does 
not  extend  to  all  of  the  rates  within  New  York 
State.  It  will  be  remembered  that  in  the  Illinois 
Case  {supra),  the  Commission’s  order  was  de- 
clared invalid  for  indefiniteness.  The  language 
used  by  the  Supreme  Court,  is  so  nearly  the  exact 
language  of  the  Commission’s  report  here,  that 
we  respectfully  call  the  Court’s  particular  atten- 
tion to  it.  The  Supreme  Court  says: 

“ The  extent  of  the  discrimination  found 
and  of  the  remedy  applied,  must  be  gathered 
from  the  report  and  order  of  the  Commis- 
sion, for  they  constitute  the  only  authorita- 
tive evidence  of  its  action.  The  reports  show 
that  the  only  discrimination  found  relates  to 
the  passenger  traffic  between  Illinois  and  two 
cities  outside  that  State  — St.  Louis  and 
Keokuk.  There  is  no  finding  that  this  traffic 
extends  in  appreciable  volume  to  all  sections 
of  Illinois.  As  to  some  sections  its  volume 
may  be  very  large  and  as  to  others  almost 
or  quite  negligible.  At  best  the  reports 
leave  the  matter  uncertain.  Obviously  this 
traffic  is  only  a small  part  of  the  interstate 


51 


passenger  traffic  moving  over  the  railroads 
in  Illinois  and  yet  the  finding  is  merely  that 
there  was  discrimination  against  this  part. 
Had  the  Commission  regarded  the  discrimi- 
nation as  state  wide,  it  is  but  reasonable  to 
believe  that  it  would  have  said  so  in  its 
finding.”  ( Illinois  Central  R.  R.  v.  P.  U . C., 
245  U.  S.  493,  507,  508.) 

The  report  in  this  case  says  (p.  186,  fol.  918) : 

“ There  may  be  cases  in  which  intrastate 
rates  affect  interstate  commerce  injuriously 
in  ways  so  manifest  as  to  make  them  subject 
to  our  control.  There  may  be  cases  in  which 
the  connection  of  intrastate  rates  with  the 
movement  of  interstate  commerce  is  so  re- 
mote and  unimportant  that  we  may  properly 
disregard  it.  But  in  every  case  which  puts 
in  question  intrastate  rates , the  decisive 
factor  is  whether  or  not  they  affect  inter- 
state commerce  injuriously  to  a considerable 
extent.  If  they  do  they  are  brought  u/nder 
our  jurisdiction  and  made  subject  to  our  con- 
trol, even  although  the  whole  rate  structure 
of  a state  should  be  involved.” 

And  as  a further  evidence  that  no  general  state- 
wide discrimination  is  found  we  have  this 
astonishing  provison  (p.  191,  fol.  942  of  this 
Record) : 

“ Those  findings  are  without  prejudice  to 
the  right  of  the  authorities  of  the  State  of 
New  York  or  of  any  other  interested  party, 
to  apply  in  the  proper  manner  for  a modi- 
fication of  our  findings  and  order  as  to  any 
fares,  charges  or  rates  on  the  ground  that 
the  latter  are  not  related  to  the  interstate 
fares,  charges,  or  rates  in  such  a yjay  as  to 
contravene  the  provisions  of  the  interstate 
commerce  act  ” 


52 


In  other  words,  1 1 There  may  he  cases  in  which 
the  connection  of  intrastate  rates  with  the  move- 
ment of  interstate  commerce  is  so  remote  and  un- 
important ” that  they  u do  not  contravene  the 
provisions  of  the  interstate  commerce  act.”  But 
regardless  of  whether  there  are  such  or  not,  the 
rates  in  those  cases  are  raised  with  the  others. 
Then  if  the  Commission  has  exceeded  its  power, 
any  interested  party  may  apply  to  it  to  have  it 
admit  and  correct  this  abuse  on  its  part. 

In  the  Illinois  Case  the  order  was  invalid  be- 
cause it  did  not  state  that  the  discrimination  was 
state  wide.  In  this  case  it  is  even  more  clearly 
invalid,  for  though  it  raises  all  rates,  it  expressly 
states  that  many  of  them  ‘ ‘ may  ’ * not  be  * ‘ related 
to  interstate  fares,  charges  or  rates  in  such  a way 
as  to  contravene  the  provisions  of  the  Interstate 
Commerce  Act.” 

Plainly,  if  the  Commission  has  exceeded  its 
power  as  to  one  single  rate  covered  by  its  blanket 
order,  the  entire  order  is  invalid.  The  Courts 
cannot  determine  which  rates  are  subject  to  its 
jurisdiction  and  which  are  not,  and  amend  the 
order  accordingly.  If  the  Commission  exceeds  by 
one  iota  the  power  granted  it,  its  act  is  void  and 
of  no  effect. 

Certainly  it  may  almost  be  denominated 
arrogance  for  a subordinate  tribunal  appointed 
by  the  Congress  brought  into  being  by  the  State 
to  say,  in  effect  “ Whether  or  not  our  power  under 
the  Constitution  extends  to  all  these  rates  we 
will  raise  them  all,  and  if  we  have  exceeded  our 
power  the  States  can  come  in  and  point  it  out  to 
us.” 

This  is  nothing  less  than  suspending  the  Con- 


53 


stitution,  as  to  such  rates  as  are  not  within  its 
power,  with  leave  to  the  sovereign  State  of  New 
York  to  apply  to  have  the  Constitution  reinstated. 
If  things  have  come  to  such  a pass,  the  States  of 
this  Union  have  indeed  raised  up  a Frankenstein 
monster  to  destroy  them.  The  dispensing  power 
was  advocated  by  the  Stuart  kings  but  is  not 
part  of  our  law. 

And  the  reason  for  this  practically  admitted 
abuse  of  power  is  thus  stated : 

“ This  proceeding  presents  a practical  question 
which  we  have  endeavored  to  deal  with  in  a practi- 
cal way.  The  needs  of  these  interstate  carriers 
for  revenue  to  enable  them  to  provide  adequate 
transportation  service  and  facilities  are  im- 
mediate and,  in  the  interest  of  the  public,  can 
not  be  permitted  to  await  the  consideration  in 
detail  of  individual  fares,  charges  and  rates.’ ’ 

The  law  provides  and  the  Constitution  requires 
that  the  railroads  should  have  the  revenue  to 
which  they  are  entitled.  But  there  is  no  sanction 
in  law  or  in  reason  for  the  proposition  that  be- 
cause of  the  claim  of  the  railroads  for  additional 
compensation,  the  ancient  privileges  of  the  great 
State  of  New  York  should  be  abolished,  our  con- 
stitutional privileges  denied,  and  the  Constitution 
itself  suspended  at  the  whim  of  the  Interstate 
Commerce  Commission. 

And  why  this  haste  on  the  part  of  the  Inter- 
state Commerce  Commission  to  raise  all  rates? 
If  the  railroads,  after  submitting  to  the  Public 
Service  Commissions,  had  been  validly  aggrieved 
by  their  denial  of  increased  fares,  could  they  not 
have  sued  out  a temporary  injunction  in  either 
the  Federal  or  the  State  Courts  on  the  ground 
14 


54 


that  the  rates  fixed  were  uncontitutional  ? Could 
they  not  have  obtained  relief  in  a few  days1,  just 
as  the  gas  companies  of  this  State  have  done! 
We  respectfully  submit  that  this  was  the  proper 
and  only  constitutional  course. 

But  that  was  not  the  desire  of  the  railroads. 
Their  desire  was  and  is  to  overthrow  the  State 
authorities.  They  demanded  action  by  the  State 
authorities  similar  to  that  of  the  Interstate 
Commission.  When  the  State  authorities,  acting 
under  their  oaths  of  office,  denied  their  request  or 
demand  for  increases,  they  in  defiance  went  to  the 
Interstate  Commission. 

The  Interstate  Commission  has  sustained  them 
in  their  defiance,  but  in  so  doing  it  has  far  ex- 
ceeded its  constitutional  and  statutory  powers. 

The  Interstate  Commerce  Commission  has  unauthorizedly 
assumed  the  authority  of  an  appellate  tribunal  to  review  the 
action  of  State  Legislature  and  regulatory  bodies. 

That  the  Interstate  Commission  does  without 
warrant  of  law  so  set  itself  up  as  an  appellate  tri- 
bunal is  the  inescapable  conclusion  from  an  ex- 
amination of  the  report  in  this  and  the  Illinois 
case. 

Here  the  first  recital  in  the  report  (p.  291)  is 
that  the  railroads  have  applied  to  a Public  Ser- 
vice Commission  for  relief,  that  it  has  been 
denied  and  that  “ thereafter  the  principal  steam 
railroads  serving  the  'State  of  New  York  filed 
with  us  a petition  for  relief  in  accordance  with 
the  provisions  of  Section  13  of  the  Interstate 
Commerce  Act.” 

This  practically  states  that  this  is  an 
appeal  from  the  order  of  the  State  authority.  The 
strange  nature  of  the  appellate  jurisdiction 


55 


claimed  by  the  Interstate  Commission  cannot  be 
better  summed  up  than  in  the  words  of  Commis- 
sioner Eastman’s  able  dissenting  opinion  as  fol- 
lows (pp.  199,  207) : 

“ In  essence,  the  carriers’  position  is  that 
when  we  authorize  an  increase  in  interstate 
rates  under  section  15-a  of  the  interstate 
commerce  act  a corresponding  increase  must 
be  made  in  intrastate  rates;  otherwise  un- 
just discrimination  against  interstate  com- 
merce results  which  it  is  our  duty  under 
section  13  to  correct.  State  Commissions 
may  be  asked  to  authorize  the  intrastate  in- 
creases, but  they  need  be  offered  no  evidence 
except  the  fact  of  our  decision  and  have  no 
real  discretion.” 

“ The  record  in  the  instant  case  is  based 
upon  and  conforms  to  this  general  theory  of 
our  power,  and  it  is  the  only  theory,  it  seems 
to  me,  upon  which  the  decision  of  the  major- 
ity can  in  full  measure  be  supported.  I am 
unable  to  believe  that  it  is  sound. 9 ’ 

It  is  not  sound.  If  there  could  be  appellate 
jurisdiction  in  the  Interstate  Commission,  it 
assuredly  could  not  be  based  upon  a mere  failure 
of  the  State  authorities  to  do  as  to  intrastate 
commerce  precisely  what  the  National  body  has 
done  as  to  interstate  commerce.  Yet  that  is  the 
claim  made. 

It  is  charged  New  York  has  been  “ narrow 
and  selfish.”  It  can  no  longer  regulate  its  own 
rates.  The  following  states  also  have  been 
4 4 narrow  and  selfish”:  Arkansas,  Florida, 
Illinois,  Louisiana,  Michigan,  Minnesota, 
Nebraska,  North  Dakota,  Ohio,  South  Caro- 
lina, Texas,  Wisconsin,  Utah  and  Iowa.  As 
to  these  fifteen,  including  New  York,  petitions 


56 


similar  to  the  one  here  involved  have  been  filed 
with  the  Interstate  Commission.  New  York 
Illinois,  Wisconsin,  Arkansas  and  Ohio,  have 
already  been  found  guilty  and  punished.  It  may 
be  assumed  that  the  other  ten  will  similarly  pay 
the  penalty  of  differing  from  the  National  body. 

These  fifteen  states  contain,  according  to  the 
Literary  Digest  of  October  23,  1920,  44,114,000 
inhabitants  or  more  than  41  per  cent  of  the  popu- 
lation of  the  United  States. 

Indiana,  with  2,930,544  inhabitants  has  simi- 
larly offended,  as  has  Nevada,  with  77,407  in- 
habitants. Up  to  mid-October,  we  are  informed 
that  the  railroads  had  filed  no  indictment  against 
these  two  states.  They  exercise  their  constitu- 
tional powers,  however,  only  at  the  sufferance  of 
the  railroads  for  the  decisions  in  this  case  and 
similar  cases  since  assure  us  that  in  such  cases 
an  indictment  is  equivalent  to  a conviction. 
Perhaps,  indeed,  even  now  these  two  states  are 
on  trial  with  the  others. 


Regulation  of  Interstate  Commerce  May  Not  Provide 
Revenue  from  State  Commerce. 

Although  States  may  not  burden  interstate 
commerce,  there  is  a reciprocal  obligation  pre- 
venting the  nation  from  destroying  that  which 
belongs  to  the  States.  It  may  not  properly  be 
said  that  all  the  power  of  the  United  States  can- 
not be  exercised  without  destroying  all  the  power 
of  the  States.  The  two  powers  are  to  be  exercised 
harmoniously. 


57 


Commissioner  Ford  says  at  folio  934  that  the 
revenues  derived  from  interstate  and  State  com- 
merce may  be  so  commingled  as  to  give  Congress 
absolute  control  over  both.  There  is  direct  au- 
thority to  the  contrary.  In  the  great  case  of 
Smyth  v.  Ames,  169  U.  S.  466,  argued  by  James 
C.  Carter  and  William  Jennings  Bryan,  Mr.  Jus- 
tice Hailan  said  at  page  541: 

“ The  State  cannot  justify  unreasonably 
low  rates  for  domestic  transportation,  con- 
sidered alone,  upon  the  ground  that  the  car- 
rier is  earning  large  profits  on  its  interstate 
business,  over  which,  so  far  as  rates  are  con- 
cerned, the  State  has  no  control.  Nor  can  the 
carrier  justify  unreasonably  high  rates  on 
domestic  business  upon  the  ground  that  it  will 
be  able  only  in  that  ivay  to  meet  losses  on  its 
interstate  business.  So  far  as  rates  of  trans- 
portation are  concerned,  domestic  business 
should  not  be  made  to  bear  the  losses  on  in- 
terstate business,  nor  the  latter  the  losses  on 
domestic  business.  It  is  only  rates  for  the 
transportation  of  persons  and  property  be- 
tween points  within  the  State  that  the  State 
can  prescribe ; and  when  it  undertakes  to  pre- 
scribe rates  not  to  be  exceeded  by  the  carrier, 
it  must  do  so  with  reference  exclusively  to 
what  is  just  and  reasonable,  as  between  the 
carrier  and  the  public,  in  respect  of  domestic 
business.  The  argument  that  a railroad 
line  is  an  entirety;  that  its  income  goes  into, 
and  its  expenses  are  provded  for,  out  of  a 
common  fund;  and  that  its  capitalization  is 
on  its  entire  line^  within  and  without  the 
State,  can  have  no  application  where  the 
State  is  without  authority  over  rates  on  the 
entire  line,  and  can  only  deal  with  local  rates 
and  make  such  regulations  as  are  necessary 
to  give  just  compensation  on  local  business.’ ’ 

15 


58 


Yet  Commissioner  Ford  cites  the  Minnesota 
Rates  Cases  as  establishing  the  conti  ary  when  no 
such  language  appears  in  the  opinion.  His  infer- 
ence is  general;  it  cannot  be  established  by  pre- 
cise reference  to  any  part  of  the  opinion  of  Judge 
Hughes. 

The  power  to  regulate  interstate  commerce  does 
not  permit  the  collection  of  revenue  in  this  State 
for  building  up  agencies  of  commeice  in  the  west 
or  especially  for  the  purpose  of  meeting  losses 
incurred  in  commerce  outside  of  New  York  where 
operating  conditions  are  entirely  different. 

The  amendment  to  the  Constitution  permitting 
the  present  income  tax  made  the  country  one  tax 
district.  Under  an  income  tax,  money  may  be 
raised  in  New  York  for  national  loads  in  New 
Mexico  and,  perhaps,  for  schools  in  California. 
Yet,  we  deny  that  money  may  be  raised  directly 
in  New  York  by  an  increase  in  rates  to  meet  the 
expenses  of  a federal  agency  outside  the  State. 


The  Formula  of  Raising  all  State  Rates  to  the  Level  of 
Interstate  Rates  is  too  Rigid  to  Be  Practicable  and  too 
Unjust  to  Have  Been  Intended  by  Congress. 

We  have  heretofore  pleaded  and  argued  that 
the  order  of  the  Interstate  Commerce  Commis- 
sion was:  1,  not  founded  on  evidence;  2,  not 
authorized  by  the  statute;  3,  unconstitutional  at 
all  events.  In  support  of  the  second  and  third  we 
offer  a criticism  of  the  absurd,  unequal  and  unjust 
result  of  the  Commission’s  action  as  indicating 
that  no  such  unhappy  culmination  in  the  exercise 


59 


of  federal  powers  was  ever  intended  by  Congress 
or  by  the  people. 

The  rule  of  law  has  been  that  State  commerce 
must  not  burden  interstate  commerce.  This  is 
very  good  if  limited  to  its  proper  held. 

Yet  the  Commission  has  derived  from  this  a 
formula  for  fixing  all  State  rates  and  destroying 
the  entire  rate  structure  of  New  York. 

The  Commission  denies  that  it  has  any  other 
formula  than  “ State  rates  must  be  raised  to  the 
level  of  interstate  rates.’ ’ It  says  that  to  apply 
any  other  rule  would  be  exercising  a power  not 
granted  it.  The  practical  result  is  that  State 
rates  may  be  advanced,  but  not  lowered.  If  the 
State  rate  is  too  high  it  may  not  be  lowered,  by  the 
Interstate  Commerce  Commission,  to  the  level  of 
interstate  rates ; if  it  is  just  right,  but  lower  than 
the  interstate  rate,  it  must  be  increased;  if  it  is 
the  same  as  the  interstate  rate,  but  unjust  in 
itself,  it  may  not  be  touched. 

As  a result  the  rate  from  New  York  to  Mount 
Vernon  is  the  same  as  the  rate  from  New  York 
to  Chicago.  The  Interstate  Commerce  Commis- 
sion denies  the  power  of  the  State  to  make  it  less, 
it  denies  its  own  power  under  the  Constitution 
to  make  it  less.  Density  of  traffic,  peculiarities 
of  operation  cannot  affect  this  rate.  So  it  is  on 
the  entirely  interurban  line  of  the  Long  Island. 
The  same  result  is  reached  for  the  Fonda,  Johns- 
town and  Gloversville,  an  electric  interurban  rail- 
road, no  different  in  character  than  hundreds  of 
other  interurban  lines,  except  that  it  parallels  the 
New  York  Central.  There  can  be  no  relief  be- 
tween Albany  and  Troy,  until  traffic  on  the  Mich- 
igan peninsula  improves  so  as  to  permit  a lower- 


60 


ing  of  the  whole  schedule  of  rates  for  the  trunk 
line  carriers  and  the  Attica  and  Arcade  simul- 
taneously. 

The  Commission  then  attempts  to  find  reasons 
to  uphold  this  result. 

As  is  so  often  the  case  where  “ progressive 
principles  ” are  invoked  by  - “ forward  looking 
men  ” things  are  to  be  changed  by  giving  them 
new  names.  The  railroads  already  existing  are 
divided  into  four  groups.  Our  roads  fall  within 
the  “ Eastern  Group/ ’ Nothing  has  changed. 
The  New  York  Central  is  still  an  interstate  road. 
The  Attica  & Arcade  is  still  a road  wholly  within 
Wyoming  county.  Operating  conditions  and  the 
competitive  situation  is  still  the  same  on  Long 
Island  and  about  New  York  city.  The  Fonda, 
Johnstown  & Gloversville  is  still  a traction  com- 
pany. Yet,  by  giving  the  roads  all  one  name,  a 
community  of  interests  an  indivisible  unity  is 
claimed  to  be  accomplished.  We  pass  from  the 
living  facts  into  metaphysics  and  mysticism.  The 
power  of  the  .States  may  be  destroyed,  because 
the  roads  that  were  once  in  the  States  have  now 
by  an  ipsi  dixit  been  transported  into  an  “ East- 
ern Group  ’ ’ and  their  situation  thereby  is  claimed 
to  be  entirely  changed. 

Still,  this  is  a simple  way.  It  relieves  the  Com- 
mission of  work,  and  the  power  may  be  broadly 
exercised  to  the  benefit  of  the  railroads  who  are 
now  in  pressing  need  of  aid,  without  regard  to 
individual  rights.  If  the  action  is  condemned  as 
hysterical,  the  Commission  suggests  that  it  may 
later  right  the  wrong.  The  mortgage  is  to  be 
foreclosed  without  any  parties  defendant  and 
their  rights  are  to  be  disposed  of  by  orders  nunc 
pro  tunc  as  they  may  later  appear. 


61 


However,  Commissioner  Ford  perceives  that 
this  broad  stroke  of  policy  is  not  enough.  He 
attempts  to  establish  himself  upon  various 
grounds.  He  submits  that  the  power  exercised 
is  justified  where  there  is  unity  of  management 
and  operation.  The  great  “ Eastern  Group  ” 
idea  is  too  large  to  fit  here.  Unity  of  manage- 
ment and  operation  may  be  a determinative  factor 
for  trunk  line  roads  only;  jurisdiction  over  the 
Attica  and  Arcade  is  concededly  lost  to  the  Inter- 
state Commerce  Commission  under  this  rule.  Yet, 
even  this  factor  will  not  stand  criticism.  If  unity 
of  management  and  operation  is  decisive,  it  is  left 
to  the  railroads  by  combination  with  interstate 
roads  to  determine  whether  they  themselves  will 
assume  state  or  federal  control.  The  Delaware 
& Hudson  Company  could  simply  operate  its  sub- 
sidiary, The  United  Traction  Company  under  the 
title,  “ The  Delaware  & Hudson  Company  ” and 
the  Albany  street  railroad  would  fall  into  the  class 
of  the  Fonda,  Johnstown  & Glover sville. 

Another  determinative  factor  is  proffered;  the 
existence  of  Interline  business  is  declared  to  be 
decisive.  If  this  is  so,  the  subway  in  New  York 
then  comes  under  the  jurisdiction  of  the  Inter- 
state Commerce  Commission  as  soon  as  it  and 
roads  running  into  New  York  begin  to  sell  stick- 
ers permitting  the  beginning  or  termination  of 
an  interstate  journey  over  it. 

The  remedy  provided  by  the  Commission  is  ex- 
travagant. On  the  contrary,  let  expensive  inter- 
state trains  be  made  extra  fare  trains.  Poor 
service  may  not  be  given  at  an  exorbitant  rate  in 
northern  New  York  and  on  the  Ho  jack  roads 
throughout  the  State,  in  order  to  provide  terminal 
16 


62 


facilities  in  Cleveland,  Ohio.  The  power  to  fix 
rates  is  the  power  to  control  service.  Unless  a 
regulating  authority  may  provide  revenue  to 
carry  out  its  commands,  it  is  helpless.  This  tax- 
ation of  the  State  of  New  York  destroys  every 
hit  of  its  power. 

The  fundamental  difficulty  with  the  opinion  of 
Commissioner  Ford  is  that  he  tries  to  find  rea- 
sons that  have  not  heen  supplied  him  by  the 
courts. 

Employing  the  dull  insolence  of  legal  phrase- 
ology he  seeks  to  establish  this  crazy  quilt  prin- 
ciple by  steeple  chase  reasoning  that  leaps  every 
obstacle. 

The  National  and  State  powers  may  be  harmo- 
nized. The  courts  have  pointed  out  that  there  is 
an  irrepressible  conflict,  only  where  there  is 
“ proved  undue  discrimination  against  persons 
and  localities  in  interstate  commerce.’ ’ This  is 
a formula  that  is  exact  and  may  be  equally  em- 
ployed. Every  word  of  it  has  a distinct  applica- 
tion. Commissioner  Ford’s  opinion  on  the 
contrary  rides  too  many  horses.  Accept  his  rea- 
sons and  no  man  may  say  where  we  will  be  taken. 

Hon.  Charles  F.  Amidon  of  Fargo,  North 
Dakota,  in  an  address  delivered  to  the  American 
Bar  Association  in  1907  (Report  1907,  page  463), 
boldly  proclaimed  the  principle,  which  Commis- 
sioner Ford  avoids.  iMr.  Jackson  E.  Reynolds  in 
April,  1908,  likewise  stated  a logical  position  in 
his  article  “ Railway  Valuation — is  it  a Pana- 
cea ” published  in  the  Columbia  Law  Review. 

The  Court,  we  assume,  must  find  reasons,  if  as 
we  confidently  trust  it  will  not,  it  should  be  misled 
into  upholding  the  action  reviewed  here.  If  this 


63 


calamity  overtakes  us,  we  recommend  your  honors 
to  the  able,  fearless  and  lawyer-like  expositions 
of  their  position  by  these  pioneers,  Amidon 
and  Reynolds,  rather  than  to  the  opinion  of  the 
Commission  for  the  foundation  of  your  deter- 
mination. 

Messrs.  Amidon  and  Reynolds  boldly  reject  the 
law  as  we  have  known  it  and  would  probably 
shock  even  the  constitutionalists  like  the  late 
President  Roosevelt  of  the  school  of  James  Wil- 
son. Yet  they  start  with  a premise  and  come  to 
a conclusion.  Their  writings  have  a logical  as 
well  as  a rhetorical  excellence  We  submit  that  a 
scientific  quality  is  indispensable  in  the  develop- 
ment of  our  constitution  law.  We  deny  that  the 
finely  balanced  structure  of  our  government  un- 
der a written  constitution  will  be  improved  by 
stop  gaps  and  patch  work  based  upon  an  hysteri- 
cal plan  to  aid  one  of  the  great  undertakings  of 
the  country  in  a crisis  which  even  now  is  passing. 

There  remains  in  our  attack  upon  this  out- 
rageous formula  of  the  Commission  and  their  rea- 
sons therefor  to  point  out  another  injustice. 

The  scheme  of  the  Commission  may  increase 
the  local  rates  above  interstate  rates.  That  is, 
the  rate  from  Utica  to  Albany  is  made  3.6  cents, 
but  the  rate  from  New  York  to  Chicago  is  made 
less. 

Mr.  Hunter,  assistant  to  Trunk  Line  Associa- 
tion, passenger  department,  testified  that  all 
passenger  rates  in  New  York,  both  state  and 
interstate,  below  three  cents  a mile  were  advanced 
to  that  minimum  by  Order  28  of  the  Director 
General.  The  rates  in  effect  for  intrastate  pas- 


64 


senger  service  in  New  York  at  the  taking  effect 
of  Order  28  were  as  follows : 


Rate  in 

Name  of  carrier.  cents  per  mile 

New  York  Central: 

Adirondack  Division  2.5 

Buffalo  Division  2. 

Harlem  Division  2.5 

Hudson  Division *2.1 

Mohawk  Division 2. 

Ontario  Division 2.5 

Ottawa  Divison  3. 

Pennsylvania  Division  2. 

Putnam  Dvision Varies1  from  2 to  3. 

Rochester  Division  2. 

St.  Lawrence  Division 2.5 

Syracuse  Division  2. 

Line  West  of  Buffalo 2.5 

New  York,  Chicago  & St.  Louis 2.5 

Buffalo,  Rochester  & Pittsburgh 2.5 

New  York,  Ontario  & Western 2.5 

Delaware  & Hudson  Co 3. 

Pennsylvania  Railroad: 

Buffalo  & Allegheny  Division 2.5 

Elmira  Division  2. 

Lehigh  Valley,  varies  from  3 cents  per  mile  short 
line  distance  to  2.5  per  mile.. 


Erie. same  as  Lehigh  Valley 

Delaware,  Lackawanna  & Western,  same  as 
Lehigh  Valley. 

The  following  questions'  by  Mr.  Paulding  and 
answers  by  Mr.  Hunter  reveal  the  solution  of 
the  whole  conflict  between  the  arbitrarily  fixed 
war  nates  for  intrastate  fares'  and  the  3.6  cents 
rates  now  in  force  by  virtue  of  Ex  Parte  74. 

Q.  Your  experience,  of  course,  has  made 
you  familiar  with  the  effect  of  the  geograph- 


* i.  e.,  2.1  to  1.17. 


65 


ical  situation  the  state  of  New  York  has  on 
the  passenger  rate  structure  in  the  East? 

A.  Yes,  sir. 

Q.  What  is  that  effect? 

A.  Well,  the  effect  is  that  New  York  and 
Buffalo,  being  such  important  commercial 
centers,  that  they  practically  are  a funda- 
mental key,  you  might  say,  to  the  entire  rate 
fabric  of  this  country.  You  cannot  disturb 
the  rate  between  New  York  and  Buffalo,  or 
Albany  and  Buffalo,  for  instance,  in  this  par- 
ticular instance  and  make  it  three  cents  a 
mile  against  3.6  cents  a mile,  without  very 
seriously  affecting  the  entire  rate  fabric  of 
the  country. 

Q.  Will  you  enlarge  that  a little  bit  and 
show  how  and  in  what  way,  as  a practical 
matter,  that  statement  of  yours  works  out? 

A.  Passengers  can  take  advantage  of  the 
lower  intrastate  fares  of  the  New  York  Cen- 
tral from  New  York  and  other  points  to 
Buffalo,  to  secure  through  transportation  at 
less  than  the  interstate  fares  on  combina- 
tions, by  buying  tickets  to  Buffalo  and  re- 
purchasing therefrom,  as  illustrated  by  the 
following  examples : 

Through  fare  New  York  to  Cleveland, 
which  is  interstate,  $20.52.  Combination  New 
York  to  Buffalo,  intrastate,  $13.16;  Buffalo 
to  Cleveland,  interstate,  $6.56:  total  $19.72, 
or  on  purchase  a saving  of  80  cents  on  every 
ticket. 

It  was  also  pointed  out  that  if  a Cleveland  pas- 
senger rode  in  a sleeper  to  Buffalo  on  an  intra- 
state ticket  he  saved  the  surcharge  of  $1.25,  which 
added  to  the  80  cents  makes)  a total  saving  of 
$2.05.  It  was  not  claimed  that  any  actual 
oases  of  defeat  have  been  discovered;  simply 
that  they  are  likely  to  occur.  The  inconvenience 
involved  to  the  traveller,  the  few  trains  whose 
17 


66 


schedules  would  permit  any  such  smart  practice, 
the  loss  of  ride  in  Pullman  between  Buffalo  and 
Cleveland,  and  the  notorious  fact  that  the 
traveller  by  Pullman  car  on  an  interstate  journey 
must  order  his  accommodations  weeks  rather 
than  days  in  advance,  make  the  whole  matter  of 
‘ 4 beating  ’ ’ the  interstate  fare  speculative,  as  Mr. 
Hunter  admitted  on  cross-examination. 

But  to  return  to  the  main  text,  which  is  the 
necessity  (so  the  carriers  claim)  that  every  way 
fare  in  New  York  must  be  3.6  cents  a mile,  not 
because  of  New  York  conditions,  but  because  of 
interstate  conditions:*  because  interstate  fares 
are  n'ow  3.6  cents  a mile.  Examiner  La  Roe  asked 
these  questions  and  Mr.  Hunter  answered  them 
as  appears1 : 


Q.  I do  not  understand  that  you  directly 
answered  Mr.  Paulding’s  inquiry,  which  is 
one  I am  considerably  interested  in,  and  that 
is  the  extent  to  which,  if  any,  the  lower  rates 
between  Buffalo  and  Albany  affect  the 
through  passenger  rates  between  the  East 
and  the  West.  Will  it,  in  your  judgment, 
require  a reduction  in  the  interstate  fares 
below  their  present  level,  or  will  it  merely 
facilitate  the  defeat  of  the  interstate  fares 
through  repurchase? 

A.  Well,  Mr.  Examiner,  in  that  regard, 
in  addition  to  the  possible  manipulation  of 
the  rates  on  the  part  of  passengers,  as  I have 
before  said,  a situation  of  this  kind  is  very 
serious,  in  that  there  are  other  arteries  of 
travel  that  are  affected  by  it.  For  example, 
between  New  York  and  Chicago,  as  I ex- 
plained before.  Buffalo  is  a very  important 
gateway.  The  New  York  Central  operates 


* “ Geographical  Situation,”  according  to  Mr.  Paulding. 


67 


via  this  gateway.  These  opportunities  for 
repurchase  are  there.  Now,  there  are  other 
lines  operating  via  various  other  gateways, 
through  Pittsburgh,  Salamanca,  Wheeling, 
through  Parkersburg;  and  the  lines  on  their 
own  bottoms,  under  existing  conditions,  and 
competition  being  an  element  in  the  conduct 
of  the  properties,  you  can  see  that  sooner  or 
later  there  is  going  to  be  an  agitation  on  the 
part  of  those  lines  which  are  adversely 
affected,  to  bring  about  some  parity  of  con- 
ditions that  exist  under  a normal  basis  of 
making  interstate  rates : that  is  one  of  the 
things  involved  in  this  whole  situation. 

By  Mr.  Paulding:  Q.  Now,  Mr,  Hunter, 
going  to  the  New  York-Buff alo  situation, 
what  is  the  intrastate  rate  between  New  York 
and  Buffalo? 

A.  The  intrastate  rate  between  New  York 
and  Buffalo  is  $13.16  over  the  New  York 
Central. 

Q.  And  take  the  other  lines  between  New 
York  and  Buffalo,  what  is  the  rate  under 
present  interstate  rates  over  those  lines? 

A.  $14.27. 

Q.  All  of  those  rates  being  larger  ? 

A.  They  are. 

Q.  Assume,  if  you  will,  that  the  New  York 
State  rates  continue  in  effect,  three  cents  a 
mile,  what  will  be  the  ultimate  effect  on  the 
other  rates  between  New  York  and  Buffalo? 

A.  Well,  judging  by  past  experience,  I 
should  say  that  they  might  not  endure  for 
any  great  length  of  time. 

Q.  Would  they  have  to  meet  the  New  York 
State  rate? 

A.  They  would,  sir. 

Q.  Decrease  interstate  rates  to  that  ex- 
tent? 

A.  I think  it  [they]  would,  inevitably. 


68 


After  giving  several  illustrations  of  the  differ- 
ence in  rates',  state  and  interstate,  due  to  the  dif- 
ference between  3.6  cents  and  3 cents  multiplied 
by  the  number  of  miles  involved,  Mr.  Hunter  was 
asked  by  Mr.  Paulding  and  answered  as  f ollows : 

Q.  In  other  words,  the  Albany-Buffalo 
rate  is  the  key  to  the  eastern  rate  situation? 

A.  Albany-Buffalo  is  the  key  to  the  New 
England  situation,  and  the  New  York-Buff alo 
is  the  key  to  the  balance  of  the  country. 

Q.  And  if  the  rates  remain  as  they  are  in- 
terstate [intrastate]  will  that  inevitably 
affect  the  [intrastate]  interstate  rate  as  a 
matter  of  competition? 

A.  Yes. 

Q.  Will  it  bring  it  down  or  leave  it  alone? 

A.  Bring  it  down. 

Q.  To  the  level  of  the  state  rate? 

A.  To  the  level,  at  least,  of  the  combina- 
tion and  the  state  rate,  I should  say. 

On  cross-examination  Mr.  Hunter  testified  that 
there  were  eight  (8)  competitive  routes  between 
New  York  and  Chicago,  viz.,  New  York  Central; 
West  Shore;  New  York,  Ontario  & Western ; Erie ; 
Lackawanna;  Lehigh  Valley;  Pennsylvania;  and 
Baltimore  & Ohio. 

Q.  (By  Mr.  Hale) : Now  the  New  York 
Central  goes  up  north  as  far  as  Albany,  then 
west  to  Buffalo  and  around  Lake  Erie  by  the 
Lake  Shore  and  Michigan  Central,  and  the 
most  southern  route  is  the  Baltimore  & Ohio? 

A.  Yes. 

Q.  Does  that  go  through  Washington? 

A.  Yes. 

Q.  The  Pennsylvania  is  the  short  line  of 
all? 

A.  Yes,  sir. 


69 


Q.  And  the  through  rate  of  all  these 
[eight]  railroads  is  found  by  multiplying  the 
mileage  of  the  Pennsylvania  by  3.6? 

A.  Substantially  so,  Judge,  but  I would 
like  to  get  this  clear  upon  the  record,  just 
how  the  rate  is  made  today. 

Q.  Very  well. 

A.  The  short  line  from  New  York  to  Chi- 
cago is  via  the  Pennsylvania  Railroad,  dis- 
tance 906  and  a fraction  miles.  It  makes 
three  cents  a mile,  as  established  by  the  Rail- 
road Administration  $27.22.  To  that,  under 
the  authority  of  the  Interstate  Commerce 
Commission  in  Ex  Parte  74,  20  per  cent  was 
added,  so  that  that  has  the  effect  of  estab- 
lishing the  present  interstate  rate  between 
New  York  and  Chicago  of  $32.67. 

Q.  Well,  that  really  if  you  divide  $32.67  by 
the  number  of  miles  you  get  the  quotient  of 
3.6? 

A.  Substantially,  I should  say.  I have  not 
tried  it. 

Q.  Well,  that  is  the  basis? 

A.  That  is  the  basis. 

Q.  If  there  is  any  difference,  it  is  one  of 
fractional  and  not  of  consequential  amount? 

A.  Yes. 

Q.  That  makes  the  rate,  therefore,  3.6,  less 
than  that  on  every  competing  line? 

A.  Yes,  sir. 

Q.  Which  is  the  longest  road,  Baltimore  & 
Ohio  or  New  York  Central? 

A.  I could  not  say  offhand.  The  New  York 
Central  is  not  the  longest  line.  I should 
imagine  perhaps  the  Baltimore  & Ohio. 

Q.  Have  you  any  idea  what  the  Baltimore 
& Ohio  gets  per  mile  on  that  same  rate  ? 

A.  No,  I have  not  precisely,  but  we  could 
figure  it  out. 

Q.  It  is  a question  of  computation,  is  it 
not? 

18 


70 


A.  A question  of  computation;  yes,  sir. 

Q.  In  other  words,  there  is  only  one  car- 
rier between  here  and  Chicago  that  is  going 
to  receive  net  3.6  per  mile? 

A.  Yes. 

Q.  And  yet  yon  propose  to  make  — I say 
you  propose  — I assume  you  identify  your- 
self with  the  New  York  Central  and  these 
other  petitioners  here.  You  propose  to  make 
every  local  passenger  in  the  state  of  New 
York  pay  a greater  rate  for  his  ride  from 
one  point  to  another  than  you  receive  on  the 
through  route  on  any  of  these  others  except 
the  Pennsylvania?  In  other  words,  that  the 
rate  fixed  by  the  Pennsylvania  by  reason  of 
competitive!  conditions  between  New  York 
and  Chicago  is  to  determine  every  local  rate 
in  the  state  of  New  York,  and  determine  it 
at  a higher  figure  than  between  New  York 
and  Chicago  ? 

A.  Well,  Judge,  of  course,  I could  not  sub- 
scribe to  that  proposition. 

Q.  You  think  that  I am  arguing  the  case? 

A.  Because  it  is  competitive. 

Q.  Is  not  that  the  fact,  beneath  it  all, 
that  only  one  carrier, — that  the  whole  busi- 
ness is  determined  by  competitive  condi- 
tions, so  far  as  the  New  York-Chicago  rates 
are  concerned;  that  you  cannot  allow  any 
one  road  to  charge  or  make  the  others  charge 
the  same  rate  precisely ; if  they  did,  one  road 
would  get  all  the  traffic  — is  that  the  idea  — 
the  short  road? 

A.  Well,  the  Eailroad  Administration,  I 
might  say,  prior  to  Federal  control,  the  rates 
between  New  York  and  Chicago  were  not 
alike  by  all  lines.  They  were  alike  by  the 
New  York  Central  and  the  Pennsylvania,  and 
the  other  lines  were  known  as  differential 
lines  and  a like  rate  obtained.  The  Railroad 


71 


Administration  decided  that  the  rate  should 
be  alike  by  all  lines.  In  other  words,  that 
the  basic  rate  of  three  cents  per  mile  should 
be  the  establishing*  factor  in  making  the  rate. 
They,  therefore,  established  like  rates  on  all 
lines  between  New  York  and  Chicago,  made 
on  the  short  mileage  on  the  Pennsylvania. 
Now,  in  approaching  the  equalization  of 
fares,  the  long  prevailing  custom  and  prac- 
tice that  had  been  in  effect  throughout  the 
country  was  taken  into  consideration.  In 
other  words,  the  fares  between  New  York  and 
Chicago,  being  great  commercial  centers,  it 
was  felt  that  they  should  be  'alike  in  order  to 
accommodate  the  enormous  travel  between 
those  two  points,  by  giving  the  passengers 
the  maximum  train  facilities  between  those 
two  points ; and  that  was  true  of  a great  many 
other  commercial  centers,  like  between  New 
York  and  Pittsburgh,  New  York  and  Wash- 
ington, and  New  York  and  St.  Louis'.  En- 
tirely aside  from  the  competitive  conditions, 
as  you  are  trying  to  represent  as  between  the 
carriers  themselves,  my  own  view  is  that 
while  the  carriers  were  naturally  concerned 
as  between  themselves,  from  a competitive 
standpoint,  it  is  not  one-sided,  in  that  the 
traveling  public  were  benefited  to  the  extent 
that  the  carriers  have  not  taken  the  full  ad- 
vantage of  the  3.6,  cents  per  mile,  so  that  the 
passengers  on  the  long  haul  got  the  advan- 
tage of  the  common  rates  and  with  the  maxi- 
mum train  service. 

Q.  I understand  you  are  making  [asking] 
here  for  a rate  of  3.6  cents  per  mile  on  all 
local  tickets  between  any  two  points,  between 
stations  on  the  New  York  Central,  including 
Albany  and  Buffalo? 

A.  Yes,  sir. 

Q.  The  real  foundation  for  your  asking  for 
that  is  the  fact  that  the  rate  from  Chicago  to 


72 


New  York  is  determined  by  the  mileage  of 
the  Pennsylvania? 

A.  No,  sir,  absolutely  not. 

Q.  Why  should  the  rate  between  Schenec- 
tady and  Utica,  for  illustration,  or  Utica  and 
Syracuse,  or  any  other  two  stations  ten  miles 
apart,  depend  remotely  on  a fare  which  must 
be  fixed  by  competitive  conditions  existing 
between  Chicago  and  New  York,  by  reason 
of  these  various  routes? 

A.  Judge,  we  are  not  attempting  to  rest 
our  case  on  the  New  York-Chicago  situation. 
As  I understand  it,  we  are  simply  trying  to 
explain  the  facts  in  the  case  — what  the  re- 
sult would  be  if  the  rate  fabric  in  the  state 
of  New  York  stands  where  it  is  today. 

Q.  I suppose  there  are  no  two  roads'  to 
Buffalo  — that  is  the  Lehigh,  the  Lacka- 
wanna, the  Erie  and  the  New  York  Central 
all  have  different  mileages? 

A.  Yes. 

Q.  That  rate  is  determined  by  the  road 
with  the  least  mileage? 

A.  The  Lackawanna  Railroad. 

Q.  So  you  take  a passenger  who  rides  over 
your  road  from  Albany  to  Buffalo  — you 
take  a less  rate  per  mile  than  the  Lacka- 
wanna receives? 

A.  That  is  true,  but  again  I say,  if  there 
is  any  disadvantage  in  that,  it  is  against  the 
carrier  and  not  the  public. 

Q.  There  is  no  exception  in  your  prayer 
for  relief,  or  what  you  desire  to  accomplish 
by  this  proceeding  or  any  similar  proceed- 
ing,— no  exception  in  favor  of  local  fares  at 
any  less  than  3.6? 

A.  No,  sir. 

So  here  is  the  position  of  the  New  York  Central 
and  other  carriers  in  this  caise.  All  local  rates 
whatsoever  in  the  state  of  New  York  must  equal 


73 


the  rate  per  mile  of  the  (shortest  railroad  between 
New  York  and  Chicago,  and  the  shortest  railroad 
between  New  York  and  Buffalo — although  seven 
of  the  eight  competitors  of  the  Pennsylvania  (in- 
cluding the  New  York  Central)  for  New  York- 
Chicago  passengers  must  take  less  per  mile,  and 
although  four  of  the  five  competitors1  of  the  Lacka- 
wanna (including  the  New  York  Central)  for  New 
York-Buff  alo  passengers  must  take  less  per  mile. 

To  understand  the  full  import  of  the  carriers’ 
position  is,  we  respectfully  urge,  to  reject  it,  both 
as  matter  of  justice  and  as  matter  of  law. 

Interstate  Commerce  Act , § 13  (4) 

The  Minnesota  Rate  Cases,  230  U.  S. 
352  412 

Shreveport  Rate  Cases,  234  U.  S.  342 

American  Express  Co . v.  Caldwell, 
244  U.  S.  417 

Illinois  Central  R.  R.  Co . v.  Public 
Service  Commission,  245  U.  S.  493 

In  none  of  these  cases  were  any  more  of  the 
state  rates  invalidated  than  those  which  the  court 
held  to  be  in  direct  conflict  with  lawfully  estab- 
lished interstate  rates.  And  § 13  (4)  of  the 
amended  Interstate  Commerce  Act  goes  no 
further. 

The  New  York  Central  is  Doing  Business  Under  a Charter 
Contract.  Only  by  an  Abandonment  of  its  Charter  and 
Federal  Incorporation  May  it  Avoid  the  Two  Cent  Fare. 

The  railroads  of  New  York  grew  up,  beginning 
in  1826,  contemporaneously  with  the  development 
of  the  immense  traffic  upon  the  Erie  canal  after 
its  original  completion  in  1823.  Some  of  the  con- 
19 


74 


stituent  companies  making  up  the  New  York  Cen- 
tral within  New  York  were  at  first  f ranchised  only 
for  passenger  traffic,  and  then  generally  the  others 
were  permitted  to  carry  freight  in  winter  only, 
upon  payment  of  the  canal  tolls  to  the  State. 
Later  they  were  permitted  to  furnish  what 
amounted  to  an  express  service  by  carrying 
freight  all  the  year  round  upon  paying  the  canal 
tolls  to  the  State  when  competing  with  the  State ’s 
project.  See  Revised  Statutes,  3d  Edition,  Vol.  I, 
page  219,  where  many  of  these  acts  are  collected 
or  referred  to;  also  L.  1851,  ch.  497,  repealing  the 
tolls,  Whitford’s  Canal  History  and  infra.  The 
State  further  made  a direct  loan  of  $3,00|0i,0l00l  to 
one  of  the  roads  and  $600,000  in  loans  to  several 
other  roads,  insuring  their  completion  and  opera- 
tion within  their  limited  local  field.  (Whitford 
Canal  History,  vol.  1,  page  234).  The  competi- 
tion of  the  canal,  therefore,  was  from  earliest 
times  the  basis  of  rate-making  in  New  York,  as 
has  been  judicially  recognized.  Mr.  Justice 
Hughes  says  in  The  Minnesota  Rate  Cases , 230 
U.  S.  352,  413 : 

“ More  potent  than  these  provisions  (early 
state  legislation)  in  the  actual  effect  upon 
railroads’  tariffs,  was  the  state  canal.  It 
is  a matter  of  common  knowledge  that  the 
traffic  on  the  trunk  lines  from  the  Atlantic 
sea  board  to  the  west  was  developed  in  com- 
petition with  Erie  Canal,  built,  maintained 
and  regulated  by  the  State  of  New  York  to 
promote  its  commerce.” 

The  canal  was  an  agency  of  interstate  commerce 
long  before  the  local  lines  now  making  up  the 
New  York  Central  were  consolidated,  and  before 


75 


Congress  by  the  Act  of  June  15,  1866  (U.  S.  iStat. 
at  Large,  eh.  CXXIV)  had  given  the  roads  their 
first  recognized  interstate  status  by  permitting 
connection  with  roads  of  other  states.  The  situa- 
tion differed  from  the  great  transcontinental  rail- 
roads constructed  primarily  for  purposes  of  inter- 
state commerce  under  Federal  charters  or  author- 
ity and  through  territories  which  have  since  be- 
come states.  The  point  is  that  in  the  beginning 
the  State  of  New  York  had,  and  exercised  ex- 
clusive jurisdiction  over  the  New  York  Central. 
Federal  interest  in  the  roads  developed  after  the 
State  had  laid  the  foundation  for  certain  agree- 
ments and  regulations  which  have  never  been  a 
direct  burden  upon  interstate  commerce  and 
which  have  not  yet  been  shown  to  be  indirect  bur- 
dens, which  Congress  by  legislation  might  now 
prohibit.  Historically,  we  are  not  dealing  with  a 
State  regulation  exercised  only  by  virtue  of  Con- 
gressional acquiescence.  We  are  dealing  with 
exclusive  powers  of  the  State  reserved  to  it  and 
under  which  it  was  fully  competent  to  deal  with 
the  whole  subject  matter,  unless'  it  is  shown  in  a 
proper  proceeding  before  the  Interstate  Com- 
merce Commission  as  elsewhere  authorized  by 
the  Transportation  Act  that  the  State  has  begun 
to  trespass  into  the  Federal  field,  or,  on  the  other 
hand,  that  national  authority  has'  come  to  compre- 
hend these  functions  of  the  State. 

When  these  contracts  were  made  by  the  State 
with  the  railroads  we  have  the  paradox  of  the 
State  regulating  purely  local  carriage  to  stifle 
and  then  to  equalize  competition  with  an  inter- 
state agency,  the  canal.  Certainly  there  was  no 
poverty  of  authority  in  the  State  at  this  period 


76 


where,  by  its  own  act,  it  suppressed  localism  in 
favor  of  nationalism.  Federal  authority  cannot 
complain  because  the  State  found  it  good  policy 
to  burden  local  commerce  in  favour  of  interstate 
commerce. 

Accordingly  the  State  began  to  make  the  regu- 
lations described  in  favor  of  the  canals1  and  then 
by  contracts  assured  the  railroads1  of  a compara- 
tively high  rate  of  return  to  insure  their  practica- 
bility in  the  very  narrow  local  field  occupied  by 
them. 

The  New  York  Central  Railroad  Company  was 
formed  from  the  following  roads,  the  rate  of  fare 
being  fixed  as  indicated. 

1.  The  Mohawk  and  Hudson  Railroad  Company 
was  incorporated  under  L.  1826,  oh.  253,  a private 
act,  as  the  first  steam  railroad  in  this  State. 
There  was  no  restriction  in  regard  to  the  rate  of 
fare  for  passengers . This  statute  was  amended 
by  Laws  1828,  ch.  122;  1832,  eh.  79;  1834,  ch.  20'; 
1834,  ch.  39;  1837,  Ch.  383;  1838,  ch.  224;  1847, 
ch.  91.  By  the  last  the  name  was  changed  to  The 
Albany  and  Schenectady  Railroad  Company. 
None  of  the  other  amendments  dealt  with  fares. 
The  original  charter  was  also  'amended  by  L. 
1851,  Ch.  20.  These  laws  remain  unrepealed. 
Another  railroad  to  be  operated  otherwise  than 
by  locomotives  was  provided  for  under  L.  1867, 
ch.  459,  with  the  name  Albany  & Schenectady 
R.  R.  Co. 

2.  The  iSchenectady  & Troy  Railroad  Co.  was 
organized  under  L.  1836,  dh.  427,  a private  act 
which  fixed  the  passenger  fare  at  6 cents  a mile . 
The  statute  was  amended  by  Laws  1839,  ch.  31; 
1840,  eh.  299;  1843,  chs.  134,  135;  1847,  chs.  270, 


77 


272,  405 ; 1850',  ch.  224.  These  laws  did  not  change 
the  fare  and  remain  nnrepealed. 

3.  The  Utica  and  Schenectady  Railroad  Com- 
pany was  organized  under  L.  1833,  ch.  294,  a pri- 
vate act,  and  the  fare  was  restricted  thereby  at 
4 cents  a mile . The  law  was  amended  by  Laws 
1837,  As.  12,  363;  1838,  dh.  282;  1844,  ch.  335  ; 
1845,  eh.  342;  1847,  chs.  270,  272,  405.  These  laws 
did  not  affect  the  fare  and  remain  nnrepealed, 
except  as  L.  1844,  ch.  335,  may  be  regarded  as  a 
constructive  repealing  act. 

4.  The  Syracuse  & Utica  Railroad  Company 
was  organized  under  L.  1836,  ch.  292,  a special  act, 
and  the  fare  was  restricted  to  4 cents.  The  stat- 
ute was  amended  by  Laws1  of  1841,  oh.  24;  1844, 
ch.  335;  1845,  oh.  343;  1847,  As.  270,  272,  405. 
These  laws  remain  unrepealed  and  the  fare  was 
not  changed. 

5.  The  Rochester  & Syracuse  Railroad  Com- 
pany was  the  result  of  a consolidation  of  the 
Auburn  & Rochester  and  Auburn  & Syracuse. 
The  Auburn  & Rochester  was  organized  under 
L.  1836,  A.  349,  a private  act.  The  fare  was  fixed 
at  3 cent.  It  was  found  impossible  to  procure 
stock  to  be  taken  with  this  restriction  and  iso  it 
was  authorized  to  charge  4 cents  (Assembly  Docu- 
ments for  1849,  No.  166).  This  was  done  by  L. 
1837,  ch.  11.  The  original  act  was  also  amended 
by  Laws  1838,  ch.  290;  1840,  As.  195,  208;  1841, 
A.  184;  1844,  eh.  335;  1846,  ch.  179;  1847,  As.  93, 
270,  272,  405.  The  fare  was  not  changed  and 
these  laws  remain  unrepealed.  The  Auburn  & 
Syracuse  was  organized  under  L.  1834,  ch.  228, 
a private  act.  Fare  was  restricted  to  4 cents. 

20 


78 


The  fare  was1  raised  to  5 cents  far  three  years  by 
Law  1839,  ch.  257.  The  act  was  also  amended  by 
Laws  1837,  ch.  158;  1838,  chs.  57,  293 ; 1844,  ch. 
335;  1847;  chs.  131,  270,  272,  405.  The  rate  of 
fare  at  4 cents  was  restored  in  1842  by  limitation 
of  the  Act  of  1839  and  sections  12  and  16  of  the 
original  act  were  expressly  repealed  respectively, 
by  Laws  1886,  ch.  592;  1838,  ch.  57.  Otherwise 
the  statutes  remain  unrepealed.  These  two  roads 
were  consolidated  by  a private  act,  Laws  1850,  ch. 
239,  on  Aug.  1,  1850,  under  the  name  of  Rochester 
& Syracuse  Railroad  Company.  No  mention  of 
fares  was  made  in  the  consolidation  act  or  in  the 
certificate  of  incorporation.  The  consolidation 
act  was  never  amended  and  remains  unrepealed. 

6.  The  Buffalo  and  Rochester  Railroad  Com- 
pany was  formed  on  December  7,  1850,  by  con- 
solidation of  the  Tonawanda  Railroad  and  the 
Attica  and  Buffalo.  The  Toniawand’a  Railroad 
was  organized  under  Laws  1832,  eh.  241,  a private 
act.  No  fare  was  fixed  in  this  act,  but  by  section 
15  the  railroad  could  determine  its1  own  tolls.  The 
statute  was  amended  by  Laws  1844,  ch.  17,  re- 
stricting the  fare  to  four  cents  and  by  Laws  1846, 
ch.  292,  which  fixed  certain  freight  rates.  Other 
amendments  were1 : Laws  1840,  chs.  116,  200 ; 1844, 
chs.  17,  50,  335;  1846,  ch.  292';  1847,  chs.  270,  272, 
405.  The  Attica  and  Buffalo  was1  formed  under 
Laws  1836,  ch,  242,  a private  act,  restricting  the 
fare  to  3 cents.  Section  13,  immaterial  here,  was 
repealed  by  Laws  1886,  ch.  598.  The  statute  was 
amended  by  Laws  1843,  ch.  169;  1838,  ch.  283; 
1842,  ch.  80;  1843,  eh.  169;  1844,  ch.  335;  1847, 
chs.  29,  270,  272,  405  ; 1849,  oh.  113.  These  stat- 
utes remain  unrepealed  and  the  fare  was  un- 


79 


changed.  The  railroads  were  consolidated  as  the 
Buffalo  and  Rochester  Railroad  Company  on  De- 
cember 7,  1850,  under  Laws  of  1850,  chapter  236. 
The  railroads  under  'sections  2-3  of  this  act  were 
given  the  powers  and  privileges  generally  granted 
railroads  under  Laws  1850,  eh.  1401,  permitting  a 
3-  cent  fare. 

7.  The  Rochester,  Lockport  and  Niagara  Falls 
Railroad  Company  had  its  origin  in  the  Lockport 
and  Niagara  Falls.  This  was  f ormed  under  Laws 
1834,  eh.  177,  a private  act,  which  fixed  fares  at 
4 cents.  The  statute  was  amended  by  Laws  1847, 
eh.  408;  1842,  eh.  36  ; 1837,  ch.  99';  1841,  eh.  122; 
1849,  ch.  259;  1850,  ch.  105.  Under  Laws  1850, 
ch.  Ill,  the  road  was  incorporated  with  additions 
as  the  Rochester,  Lockport  and  Niagara  Falls 
Railroad  Company.  See  also  Laws  1851,  oh.  228. 

8.  The  Buffalo  & Lockport  Railroad  Company 
was  originally  incorporated  on  April  29,  1852, 
under  the  general  act  Laws  1850,  oh.  140,  permit- 
ting the  roads  by  section  28,  subd.  9,  to  charge  3 
cents  a mile  for  a passenger  and  his  baggage. 

9.  The  Mohawk  Valley  Railroad  Company  was 
likewise  so  incorporated  on  December  29,  1852. 

10.  The  Syracuse  and  Utica  Direct  was  likewise 
so  incorporated  on  January  26,  1853. 

The  Constitution  of  1848  had  provided  for  in- 
corporation by  general  act  and  so  the  later  rail- 
roads had  incorporated  under  the  general  law 
providing  3 cents.  Yet  it  is  to  be  noted  that  the 
general  law  in  section  49  of  Laws  of  1850',  eh.  140, 
contained  a “ very  cautious1  provision  99  permit- 
ting railroads  under  special  charters'  to  charge  a 
greater  sum  where  the  charter  so  prescribed  and 
protecting  the  contract.  Johnson  v.  H.  R.  R.  R. 
Co.,  49  N.  Y.  455,  at  459  and  463. 


80 


It  was  later  held  that  these  charter  fares  were 
mot  changed  by  any  later  general  legislation  ex- 
pressing the  rate-making  power,  except  where  a 
consolidation  privilege  expressly  provided  for  a 
lower  fare  as  a condition  of  offer  and  acceptance. 
Parker  v.  Elmira , etc.,  By.,  165  N.  Y.  274. 

In  the  meantime  the  irrevocable  nature  of  these 
agreements  with  the  State  had  long  been  urged 
by  the  railroads  bef  ore  their  contentions  had  been 
specifically  recognized  by  the  saving  clauses  for 
(charter  fares  in  the  Railroad  Law  of  1850  and  in 
Laws  1848,  ch.  140,  § 46. 

Remonstrances  were  filed  by  the  several  rail- 
roads on  the  line  from  Albany  to  Attica,  Wyom- 
ing county,  and  by  the  Auburn,  Syracuse  and 
Tonawanda  Railroad  companies  against  petitions 
to  the  Legislature  for  reduction  of  fares.  (As- 
sembly Documents,  No.  194,  Vol.  5,  1845.)  The 
railroads  claimed  in  part : 

“ In  most  of  these  charters,  or  proposi- 
tions, on  the  part  of  the  Legislature,  to  those 
who  choose  to  accept  them,  and  hazard  their 
property  in  the  undertaking,  there  is  a pro- 
vision, that  those  who  make  the  roads  upon 
the  terms  of  the  proposition,  may  receive 
four  cents  per  mile  for  the  transportation  of 
a passenger  and  his  baggage.  That  after  the 
road  had  been  ten  years  in  use,  the  State, 
(that  is  the  people)  may  take  it  from  its 
owners,  on  paying  them  the  whole  cost  of 
construction  of  the  road,  with  all  moneys 
expended  for  permanent  fixtures,  with  in- 
terest on  such  sums,  at  the  rate  of  ten  per 
cent  per  annum,  together  with  all  moneys 
expended  for  repairs  or  otherwise,  deducting 
the  tolls  received.  These  laws  or  charters 
are  on  the  part  of  the  people  of  the  State, 


81 


a naked  offer  of  these  advantages  to  those 
who  will,  ivith  their  capital,  build  these  roads 
for  the  benefit  of  the  people,  upon  the  guar- 
anty contained  in  them.  We  admit  that  there 
is  a right  reserved  to  alter,  modify  or  repeal 
the  act,  but  we  do  most  respectfully  but 
earnestly  insist  that  this  reserved  power  will 
not  allow  the  Legislature  to  destroy  the  guar- 
anty upon  which  the  investment  was  made, 
and  the  work  accomplished.  If  the  com- 
panies shall  abuse  their  privilege  or  violate 
any  provision  of  law,  then  we  admit  that 
the  power  of  alteration,  or  repeal,  may  be 
exercised.” 

These  remonstrances  were  signed  by  the  presi- 
dents of  the  Mohawk  and  Hudson,  Utica  & Sche- 
nectady, Syracuse  and  Utica,  Auburn  & Roch- 
ester, The  Tonawanda,  and  the  treasurer  of  the 
Auburn  and  Syracuse,  the  New  York  Central's 
predecessors  in  title. 

The  report  of  the  Assembly  Committee  on  Rail- 
roads (Assembly  Doc.  No.  224,  Yol.  6,  for  1845) 
accepts  the  argument  that  a contract  existed.  The 
committee  says  in  part: 

“ The  charters  created  by  the  Legislature 
may  be  considered  as  offers  or  inducements 
held  out  to  individuals  by  the  State,  inviting 
them  upon  the  terms  which  they  contain,  to 
invest  their  money  in  the  construction  of 
works  deemed  to  be  of  public  utility  and  im- 
portance. These  inducements  are  the  right 
to  receive  tolls,  either  unlimited  or  restricted ; 
the  right  of  managing  their  own  affairs, 
within  reasonable  bounds,  and  a definite 
period  for  the  continuance  of  such  rights. 
The  subscription  of  stock  in  such  corpora- 
tions and  the  construction  of  work  contem- 
21 


82 


plated  by  the  charter,  is  the  acceptance  of  the 
stockholders  of  the  proffer  made  by  the  State 
in  the  grant  of  the  charter.  This  proffer  and 
acceptance  constitute  a contract  between  the 
stockholders  and  the  State,  which  all  will  ad- 
mit should  be  observed  in  good  faith  by  the 
sovereign  contractor. 

If  this  was  all  that  vested  in  the  given 
case,  it  would  make  a contract  that  might  find 
security  in  judicial  protection,  and  the  State 
would  not  retain  its  power  to  violate  it  by 
subsequent  legislation.  But  there  is  another 
feature  in  our  legislation  in  this  State  which 
enters  into,  and  makes  part  of  all  the  char- 
ters, and  may  materially  affect,  in  a more 
legal  aspect,  the  contract  contained  in  the 
grant  and  acceptance  of  such  charters.  By 
a general  law  the  Legislature  reserves  to 
iaseJf  the  right  of  altering  or  repealing  any 
corporate  charter,  and  this  reservation,  for 
greater  caution,  is  also  inserted  separately  in 
each.  This  being  one  of  the  terms  of  the  con- 
tract, must  be  taken  into  account  in  giving 
it  a legal  construction.  This  provision  is 
incorporated  specifically  in  all  the  railroad 
charters  granted  by  the  Legislature  of  this 
State.  There  are,  however,  other  provisions 
in  them  which,  as  to  some  features,  may  tend 
to  qualify  this  general  reservation,  even  in 
giving  them  legal  construction.  If  there  was 
nothing  but  the  general  reservation,  the  Leg- 
islature would  doubtless  have  the  strict  legal 
right  to  reduce  the  rates  of  fare  on  railroads, 
or  to  deprive  these  corporations  wholly  of  the 
privilege  of  charging  fare,  or  any  other 
advantage  given  by  the  charter,  however  op- 
pressive or  unjust  such  deprivation  might  be, 
because  the  power  was  given  by  the  letter  of 
the  contract;  as  to  the  right  to  deprive  in- 
come from  the  railroads  there  is  a peculiar 
provision  in  all  the  charters.  The  Legisla- 
ture appear  to  have  thought  proper  to  grant 


83 


privileges  proportionate  to  the  risk;  but  still 
it  might  happen  that  the  privilege  granted 
would  give  too  great  a profit  to  the  successful 
adventures.  It  was  necessary  to  retain  some 
power  over  corporations,  in  the  aspect  of  a 
possible  result,  by  some  provision  which 
would  prevent  them  from  becoming  too  pow- 
erful or  wealthy. 

To  reach  this  case,  the  Legislature  have  in- 
serted a provision  in  each  of  the  charters, 
authorizing  the  State  to  take  from  the  stock- 
holders the  entire  road,  upon  payment  to 
them  of  all  the  money  invested  therein,  with 
interest  thereon,  at  rates  varying  from  ten  to 
fourteen  per  cent,  deducting  the  income 
thereof,  received  by  the  stockholders.  This 
has  been  by  some  deemed  as  in  effect  saying 
to  stockholders,  that  they  might  realize  as 
much  income  as  they  could  under  the  provi- 
sions of  the  charter,  as  a compensation  for 
the  risk,  but  if  it  exceed  ten  or  fourteen  per 
cent,  the  State  will  take  it  into  their  own  pos- 
session; and  that  as  to  this  feature  of  the 
grant,  the  reservation  is  all  the  control  the 
Legislature  will  exercise. 

It  may  be  very  plausibly  urged  that,  as  by 
these  provisions  the  Legislature  have  adopt- 
ed one  mode  to  guard  against  the  excess  of 
income,  that  the  mode  thus  adopted  is  exclu- 
sive of  all  other  modes,  and  that  the  only 
remedy  which  they  had  retained  for  an 
excess  of  income,  is  the  appropriation  of  the 
road,  upon  payment,  according  to  the  stipu- 
lation, and  that  they  could  not  resort  to  a 
modification  of  the  charter  merely  for  the 
purpose  of  limiting  income.  The  committee 
do  not  feel  called  upon  to  give  a mere  tech- 
nical legal  construction  to  the  contracts  con- 
tained in  these  charters,  as  modified  by  these 
pm visions/  ’ 


84 


The  report  of  the  Assembly  Committee  on  Rail- 
roads (Assembly  Doc.  No.  166  for  1849,  Vol.  3) 
states  that  the  railroads  always  insisted  these 
early  charters  constituted  contracts'  under  the 
Dartmouth  College  Doctrine,  despite  the  reserved 
power  always  expressed  in  the  statutes  and  later 
incorporated  in  the  Constitution.  It  said  in  part : 

“ These  railroads  have  uniformly  insisted, 
that  although  there  was  a provision  in  each 
of  the  charters,  that  the  Legislature  might 
alter  or  repeal  it,  yet  as  to  fare  they  could 
only  change  it  by  taking  the  road  under  the 
above  provision/ * 

The  Assembly  Committee  on  Railroads  (Assem- 
bly Doc.  No.  51  for  1846)  later  assumed  that  the 
reserved  power  to  ‘ ‘ alter  or  repeal  ’ ’ contained  in 
the  charters  was  sufficient  to  authorize  a change. 
Again  in  Assembly  Doc.  No.  88  for  1851,  the  same 
committee  said  in  part : 

‘ ‘ Some  of  the  corporations  whose  charters 
contain  specific  provisions  with  regard  to 
fare,  while  contending  that  they  are  not 
legally  bound  by  this  provision  of  the  general 
law,  nevertheless  express  a willingness  to 
submit  to  and  comply  with  its  requirements. 
Were  this  otherwise,  it  would  be  in  the  power 
of  the  State  to  compel  submission,  by  buying 
them  out  on  the  terms  reserved  in  their  re- 
spective charters,  as  there  can  be  but  little 
doubt  the  State  would  find  other  companies 
ready  to  purchase  on  the  same  terms.” 


In  all  this  contemporaneous  construction  of 
these  early  charters  it  should  be  noted  that  even 
the  most  extreme  servant  of  the  public  interest 
never  claimed  that  the  fares  could  be  fixed  under 


85 


the  common  law  regulatory  powers1  over  common 
carriers.  In  other  words,  that  part  of  the  police 
power  known  as  the  “ ratemaking  power  ” com- 
prehended as  part  of  the  common  law  was  never 
invoked.  If  the  rates  could  be  reduced  it  was) 
said  that  this  could  be  done  only  by  the  reserva- 
tion in  the  contract,  put  there  to  avoid  the  inevi- 
table consequences  of  the  Dartmouth  College  case 
as  against  the  State.  The  railroads'  consistently 
denied  that  fares  could  be  changed  even  under  the 
reserved  power,  regarding  the  fares  as  an  integral 
part  of  the  property  in  their  franchise. 

Agitation  for  reduced  fares  continued,  how- 
ever. The  railroads  consented  to  a reduction  in 
fares  in  return  for  a decided  advantage.  A pri- 
vate Charter  was  offered  the  ten  roads  whose 
charters  and  fares  are  listed  above,  permitting 
them  to  consolidate.  Despite  the  Constitution  of 
1848,  providing  for  general  laws,  a private  law 
was  necessary  to  do  this  very  special  thing.  This 
is  Laws  1853,  oh.  76.  There  is  nothing  mandatory 
requiring  the  railroads  to  accept  it.  The 
ten  railroads  which  are  expressly  named  therein 
“ or  any  two  or  more  of  them  are  hereby  au- 
thorized at  any  time  to  consolidate  such  compa- 
nies into  a single  corporation  in  the  manner  fol- 
lowing.^ Then  followed  the  conditions,  the 
seventh  being : 

“ When  any  two  or  more  of  the  railroad 
companies  named  in  this  act  are  so  consoli- 
dated, said  consolidated  company  shall  carry 
way  passengers  on  their  road  at  a rate  not  to 
exceed,  two  cents  per  mile.” 

'Since  the  roads  so  named  ran,  generally  speak- 
ing, from  Albany  to  Buffalo,  two  cents  has  been, 
22 


86 


until  the  war,  the  fare  on  this  route,  now  part  of 
the  New  York  Central. 

This  is  the  first  agreement  as  to  the  fares  in 
controversy  in  the  case  at  bar.  The  railroads:  ac- 
cepted the  offer  on  July  7,  1855,  by  filing  a con- 
solidation agreement  in  the  Secretary  of  State’s 
office.  The  fare  was  incorporated  in  the  certifi- 
cate by  reference  generally  to  the  act.  The  name, 
New  York  Central  Railroad  Company,  was 
adopted. 

The  Hudson  River  Railroad  Company  was  in- 
corporated under  a private  act,  Laws  1846,  ch. 
216,  and  permitted  to  charge  2 y2  cents  (§  17). 
Later,  however,  the  general  rate  fixed  at  3 cents 
under  the  first  general  railroad  laws  of  1848  and 
1850  was  held  to  apply  to  it  and  it  was  allowed  to 
charge  3 cents.  Johnson  v.  Hudson  River  R.  R., 
49  N.  Y.  (1872)  455.  The  general  rates  as  dis- 
tinguished from  the  charter  fares  have,  however, 
never  been  held  to  apply  to  the  part  of  the  line 
first  known  as  the  New  York  Central  Railroad 
Company.  When  the  Central  and  the  Hudson 
companies  were  consolidated  under  Laws  1869,  ch. 
971,  the  New  York  Central  Railroad  was  held  to 
its  bargain,  although  the  Hudson  River  R.  R.  Co. 
was  left  un trammeled  by  other  than  the  general 
rate-making  power.  The  law  provided  in  sec- 
tion 3: 

“ Section  3.  Upon  the  making  and  per- 
fecting such  agreement  and  act  of  consolida- 
tion as  hereinbefore  provided,  and  filing  the 
same  or  a copy  thereof  in  the  office  of  the 
Secretary  of  State  as  aforesaid,  the  said 
corporations,  parties  thereto,  shall  be  deemed 
and  taken  to  be  one  corporation  by  the  name 
provided  in  said  agreement  and  act,  but  such 


87 


act  of  consolidation  shall  not  release  such 
new  corporation  from  any  of  the  restrictions, 
disabilities  or  duties  of  the  several  corpora- 
tions so  consolidated;  but  nothing  in  this  act 
contained  shall  allow  any  rate  of  fare  for  way 
passengers,  greater  than  two  cents  per  mile 
to  be  charged  or  taken  over  the  track  or  tracks 
of  that  railroad  now  known  as  the  New  York 
Central  Railroad  Company;  and  the  rate  of 
fare  for  way  passengers  over  the  track  or 
tracks  now  operated  by  the  said  New  York 
Central  Railroad  Company  shall  continue  to 
be  tivo  cents  per  mile  and  no  more  wherever 
it  is  now  restricted  to  that  rate  of  fare;  but 
nothing  herein  contained  shall  apply  to  street 
railroads 


The  jealousy  with  Which  the  Legislature 
guarded  this  valuable  concession  by  the  railroads 
is  further  shown  by  the  fact  that  when  the  rate- 
making  power  waisi  fully  established  after  the 
creation  of  the  original  State  Railroad  Commis- 
sion, the  2-cent  fare  was  expressly  excluded  from 
rate-making  by  an  exception  contained  in  section 
37  of  the  Railroad  Law  of  18'90  and  now  contained 
in  § 57  of  the  present  Railroad  Law  as  f ollows : 

u This  chapter  shall  not  be  construed  to 
allow  any  rate  of  fare  for  way  passengers 
greater  than  two  cents  per  mile  to  be  charged 
or  taken  over  the  track  or  tracks  of  the  rail- 
road known  as  the  New  York  Central  Rail- 
road Company,  and  the  rate  of  fare  for  way 
passengers  over  the  track  or  tracks  of  such 
company  shall  continue  to  be  two  cents  per 
mile  and  no  more,  whenever  it  is  restricted 
to  ’ that  rate  of  fare,  nor  shall  any  consoli- 
dated railroad  corporation  charge  a higher 
rate  of  fare  per  passenger  per  mile  upon  any 
part  or  portion  of  the  consolidated  line  than 


88 


was  allowed  by  law  to  be  charged  by  each 
existing  corporation  thereon  previous  to  such 
consolidation.”  (Derived  from  Laws  1890, 
ch.  565,  § 37.) 

The  Public  Service  Commission  now  claims 
that  power  has  been  delegated  to  it  to  waive  the 
State’s  right  to  the  two  cent  fare  and  that  the 
Commission  has  the  positive  duty  to  increase  the 
fare  if  it  is  insufficient. 

doing  back  to  the  period  of  the  Civil  War,  we 
find  that  the  railroad  in  a period  of  economic 
stress  almost  equal  to  the  present,  cried  out 
against  its  bargain  for  a two  cent  fare.  No  ju- 
dicial power  was  invoked  to  set  aside  the  fare 
upon  the  ground  that  it  was  merely  a noncompen- 
satory rate. 

Instead  the  railroad  applied  to  the  other  party 
to  the  contract  to  increase  the  fare  by  a special 
law  waiving  the  State’s  right  to  the  sum  “ nomi- 
nated in  the  bond.”  Governor  Fenton  vetoed  the 
bill  passed  by  both  houses  and  said  in  part  (Gov- 
ernor’s Messages,  April  28,  1865,  Vol.  5,  p.  659) : 

“ When  the  law  to  consolidate  the  several 
railroads  connecting  the  cities  of  Albany  and 
Buffalo  was  projected,  its  passage  was  urged 
because  it  would  largely  facilitate  the  transit 
of  passengers  and  freight  between  the  west 
and  the  commercial  metropolis.  The  argu- 
ment in  favor  of  the  measure  was  confined 
almost  exclusively  to  the  supposed  advan- 
tages which  would  accrue  to  the  public,  and 
to  the  people  of  the  State,  from  the  reduced 
cost  necessarily  resulting  from  unity  of  man- 
agement. 

An  examination  of  the  various  acts  shows 
that  the  legislation  of  the  State  has  been 


89 


greatly  influenced  by  the  considerations 
which  were  urged  in  favor  of  the  act  of  con- 
solidation. 

The  charters  of  some  of  the  roads  first 
authorized,  contained  provisions  which  re- 
strained them  from  carrying  freight  of  any 
kind.  The  alleged  necessity  of  protecting 
the  State  revenues  by  preventing  competition 
with  the  Erie  Canal,  was  the  published 
justification  of  these  restrictions.  A few 
years  of  experience,  however,  clearly  demon- 
strated the  error  of  this  position.  It  came  to 
be  understood  that  a decrease  of  the  revenues 
of  the  State  canals  might  be  the  less  of  two 
evils,  and  that  enhanced  values  of  real  estate 
could  be  more  safely  relied  upon  as  a re- 
source from  which  the  expenses  of  the  gov- 
ernment should  be  derived,  than  the  uncertain 
and  limited  receipts  resulting  from  the  impo- 
sition of  tolls  upon  commercial  articles  in 
transit  between  the  consumer  and  the  pro- 
ducer. 

In  accordance  with  the  teachings  of  ex- 
perience, and  in  response  to  the  demands  of 
the  people,  the  Legislature  has,  from  time  to 
time,  removed  the  restrictions  which  virtually 
gave  the  Erie  canal  a monopoly  of  the  busi- 
ness of  transmitting  merchandise  and  prod- 
uce. By  the  provisions  of  chapter  335  of  the 
Laws  of  1844,  the  Utica  and  Schenectady  rail- 
road company  was  authorized  to  transport 
6 goods,  chattels  and  other  property  that  may 
be  offered  for  transportation,  during  the  sus- 
pension of  canal  navigation  only/  and  ‘ shall 
pay  to  the  Commissioners  of  the  Canal  Fund, 
the  same  tolls  per  mile,  on  all  the  goods,  chat- 
tels and  other  property  so  transmitted  as 
would  have  been  paid  on  them  had  they  been 
transported  on  the  Erie  Canal. ’ The  same  act 
which  thus  removed  the  prohibition  to  carry 


23 


90 


freight,  provided  that  the  railroads  west  from 
the  terminus  of  the  Utica  and  Schenectady 
railroad  should  have  the  privilege  of  carry- 
ing local  freight,  without  being  subjected  to 
the  payment  of  tolls.  By  the  provisions  of 
chapter  270,  Laws  of  1847,  the  4 Utica  and 
Schenectady  railroad  company,  are  author- 
ized to  take  and  transport  upon  their  railway 
all  goods,  chattels  and  other  property  that 
may  be  offered  for  transportation,’  and  by 
the  same  act,  the  same  privileges  were  given 
to  the  connecting  roads  — thus  yielding  the 
right  to  carry  freight  throughout  the  entire 
year,  upon  the  condition  that  such  freight 
should  pay  to  the  State  the  same  tolls  to 
which  they  would  have  been  subjected  had 
they  been  transported  on  the  canal. 

By  the  provisions  of  chapter  497  of  the 
Laws  of  1851,  the  Legislature  provided  that 
1 It  shall  not  be  necessary  for  any  railroad 
company  in  this  State  to  pay  any  sums  of 
money  into  the  treasury  of  this  State,  on  ac- 
count of  the  transportation  of  property  on 
any  railroad  on  and  after  the  1st  day  of 
December,  in  the  year  1851,  thus  finally  re- 
moving all  restrictions  upon  internal  com- 
merce, and  in  obedience  to  the  demand  of 
trade  permitted  this  withdrawal  from  the 
revenues  of  the  canals  that  the  people  might 
enjoy  the  benefits  of  cheap  intercommunica- 
tion. The  process  by  which  this  result  was 
attained,  was  gradual  but  sure,  and  shows 
plainly  that  those  who,  from  time  to  time, 
gave  these  measures  their  official  sanction, 
were  actuated  by  a sincere  and  enlightened 
determination  to  secure  to  the  people  all  the 
advantages  possible  to  be  derived  from  cheap 
and  rapid  transit. 

The  Legislature  of  1853,  following  the 
established  precedents,  and  apparently 


91 


prompted  by  the  same  motives  which  had 
marked  the  actions  of  their  predecessors,  re- 
moved the  obstacle  which  stood  in  the  way  of 
a full  realization  of  the  benefits  to  be  derived 
from  the  policy  previously  declared.  By  con- 
solidating the  several  corporations,  it  secured 
the  advantage  of  centralized  direction.  In 
consideration  of  this  final  and  advantageous 
concession,  the  Legislature  of  1853,  only  ex- 
acted that  4 when  two  or  more  of  the  rail- 
road companies  named  in  this  act  are  so  con- 
solidated, said  consolidated  company  shall 
carry  way  passengers  on  their  road  at  a rate 
not  to  exceed  two  cents  per  mile.  ’ In  making 
this  restriction,  the  Legislature  adhered  to 
the  policy  of  the  State  as  previously  ex- 
pressed and  secured  the  same  by  positive 
enactment  — while  it  removed  every  form  of 
restriction  which  could  enhance  the  cost  of 
transportation,  it  protected  the  rights  of  the 
public,  by  limiting  the  price  which  should  be 
exacted. 

By  the  provisions  of  the  act  herewith  re- 
turned, it  is  sought  to  reverse  the  legislation 
of  1853 ; to  change  the  policy  which  seems  to 
have  been  developed  by  previous  legislation 
and  to  impose  a higher  rate  of  fare  upon  the 
people  who  may  find  it  necessary  to  pass  over 
this  line  of  the  Central  Company. 

AC- 

w TV*  *7v*  w *n*  w *7v* 

Should  the  enhanced  prices  complained 
of  continue  to  prevail  and  the  managers  be 
thereby  forced  to  forego  the  declaration  of 
a dividend,  the  stockholders  would  not  then 
be  called  to  endure  a burden  more  oppressive 
than  has  been  sustained  by  many  corpora- 
tions which  have  not  had  relief  extended  to 
them  by  legislative  enactment.  But  it  is  im- 
probable that  such  enhanced  values  should 
long  prevail.  The  rebellion  has  been  sub- 
stantially crushed;  order  is  being  rapidly  re- 


92 


stored,  and  in  a short  time  the  country  will 
be  again  blessed  with  peace.  With  its  return 
it  is  safe  to  assume  that  there  will  be  an  in- 
crease in  the  number  of  laborers  and  a de- 
crease in  the  cost  of  material.  The  west  will 
continue  to  be  the  great  producing  country  of 
the  world.  Emigration  will  continue  to 
people  its  hills  and  valleys.  Our  commerce 
will  again  cover  every  sea.  A large  propor- 
tion of  this  commmerce  and  the  thousands 
that  will  come  from  Europe,  must  or  will 
pass  over  this  great  central  route,  and  this 
corporation  more  than  any  other,  must  share 
in  the  prosperity  to  which  our  country  is  des- 
tined. Let  us  patiently  await  the  fulfillment 
of  that  destiny,  in  the  confident  trust,  that  in 
a short  time,  the)  prosperity  of  the  com- 
pany will  be  secured  without  further  burdens 
upon  the  traveling  public.  If  experience 
shall  not  prove  the  embarrassments  under 
which  it  is  said  to  labor,  to  be  but  of  a tem- 
porary character;  and  if  the  proposed  re- 
forms in  its  future  management  shall  not 
secure  to  capital  an  ample  recompense,  I 
shall  then  be  most  willing  to  co-operate  with 
the  Legislature  in  affording  such  relief  as 
may  be  wise  and  necessary.” 


The  bill  was  not  passed  over  his)  veto.  At  the 
session  of  1867  he  again  vetoed  a bill  to  raise  the 
fare  to  2%  cents,,  giving  substantially  the  same 
reasons.  This  bill  was  not  passed  over  the  veto. 
(Governor’s  Messages,  April  11,  1867,  Vol.  5, 
pages  802-809. ) 

And  so  it  has*  remained  until  the  present. 
Neither  party  to  the  contract  has  ever  admitted 
or  contended  that  the  two  cent  fare  was  based1  on 
the  rate-making  power.  After  a fare  was  fixed  in 
the  charters  no  lower  fare  was  ever  imposed.  The 


93 


two  cent  fare  came  into  effect  by  consent  of  the 
appellant  and  agreement  with  the  State.  Through 
all  the  difficulties  of  hard  times  and  increasing 
prices  that  from  time  to  time  marked  the  period 
of  1855-1917,  no  attempt  has  ever  been  made  to 
attack  the  agreement  as  noncompensatory,  nor 
has  the  agreement  been  modified  by  general  or 
private  law,  administrative  bodies  exercising 
delegated  powers  or  until  this  case,  by  judicial 
decree.  The  fare  was  only  changed  temporarily 
under  the  undoubted  power  of  the  Federal  Gov- 
ernment during  the  war. 

From  the  foregoing  we  think  we  have  estab- 
lished that  the  two  cent  fare  is  part  of  the  con- 
sideration of  a charter  contract.  It  has  always 
been  iso  interpreted  by  the  parties  to  it. 

This  consolidation  charter  is  a contract  under 
the  modern  authority  of  Cleveland  v.  Cleveland 
City  Ry.  Co.,  194  U.  S.  517.  There  street  rail- 
ways were  consolidated  under  a statute  substan- 
tially the  same  as  sec.  7 of  L.  1853,  eh.  76.  The 
Ohio  statute  provided : 

“ Such  street  railroad  companies  may  con- 
solidate on  the  terms  and  conditions  appli- 
cable to  consolidation  of  railroad  companies; 
provided,  however,  no  increase  of  fare  shall 
he  allowed  on  any  street  railroad  route  hy 
reason  of  such  consolidation.”  (Margin, 
page  534.) 

This  was  a restriction  on  the  railway  company, 
similar  to  the  maximum  of  two  cents  agreed  to  by 
the  appellant  here. 

When  the  city  of  Cleveland,  under  a claim  of 
right  conferred  by  the  reserved  power,  attempted 


24 


94 


to  reduce  the  existing  fare  of  five  cents  a ride  to 
four  cents,  the  Supreme  Court  held  that  there  was 
an  impairment  of  a contract.  The  case  here  is  no 
different  except  that  the  iState  now  claims  its  part 
of  the  contract. 

That  these  charters  will  he  upheld  at  the  in- 
stance of  the  government  making  them  has  re- 
cently been  decided  in  a case  where  war  time 
conditions  were  alleged  to  be  working  confiscation. 

In  Columbus  Ry.  <&  Power  Co.  v.,  Columbus , 249 
U.  S.  399,  the  railway  company  sought  to  be  re- 
lieved in  equity  from  a similar  charter  contract ; 
this  time  the1  complaint  was  that  the  maximum 
fare  was  not  sufficient  to  meet  the  expenses 
caused  by  the  war,  rather  than  'that  the  munic- 
ipality had  sought  to  break  the  bargain.  The 
Court  discusses  fully  the  effect  of  the  rule  “Act 
of  God  or  the  public  enemy  ” in  such  cases  and 
denies  the  railway  any  relief.  It  says: 

‘ ‘ It  certainly  was  not  intended  to  question 
the  principle  frequently  declared  in  the  de- 
cisions of  this  court  that  if  a party  charge 
himself  with  an  obligation  possible  to  be  per- 
formed he  must  abide  by  it,  unless  perform- 
ance is  rendered  impossible  by  the  act  of  God, 
the  law  or  the  other  party. ’ ’ (Page  412.) 

More  recently  Mr.  Justice  Holmes  in  Brooks- 
Scanlon  Co.  v.  R.  R.  Comm.,  251  U.  S.  396,  staid  by 
way  of  dictum : 

“ It  is  true  that  if  a railroad  continues  to 
exercise  the  power  conferred  upon  it  by  char- 
ter from  a State,  the  State  may  require  it  to 
fulfill  an  obligation  imposed  by  its  charter, 
even  though  the  fulfillment  in  that  particular 
may  cause  a loss.”  (Page  399.) 


95 


Somewhat  more  specifically  the  Supreme  Court 
mys  in  Grand  Rapids  <&  Indiana  Ry.  Co.  v. 
Osborn,  193  U.  S.  7,  29-30: 

“ That  a railroad  corporation  may  con- 
tract with  a municipality  or  with  a State  to 
operate  a railway  at  agreed  rates  of  fare  is 
unquestionable.  And  where  the  provisions  of 
an  accepted  statute  respecting  rates  to  be 
charged  for  transportation  are  plain  and  un- 
ambiguous, and  do  not  contravene  public 
policy  or  positive  rules  of  law,  it  is  clear  that 
a railroad  company  cannot  avail  of  privi- 
leges which  have  been  produced  upon 
stipulated  conditions  and  repudiate  perform- 
ance of  the  latter  at  will.  Whether  if  a con- 
dition in  a statute  is  couched  in  ambiguous 
language  and  is  susceptible  of  two  construc- 
tions, as  it  is  claimed  in  the  case  before  us 
in  respect  to  the  basis  upon  which  the  gross 
receipts  per  mile  of  operated  road  were  to 
be  calculated,  a construction  should  be 
adopted  which  will  not  render  the  condition 
repugnant  to  the  Constitution  of  the  United 
States,  we  need  not  determine.  The  statute 
in  question,  in  its  entirety,  has  been  con- 
strued by  the  Supreme  Court  of  Michigan 
and  held  valid,  and  its  decision  as  to  the 
proper  interpretation  of  the  language  of  the 
act  in  respect  to  the  mode  of  ascertaining  the 
gross  receipts  per  mile  does  not  render  the 
statute  repugnant  to  the  Constitution  of  the 
United  States,  within  the  ruling  recently 
made  by  his  court  in  Wisconsin  & Michigan 
Railway  Company  v.  Powers,  191  U.  S.  379.” 

See  'also  Matter  of  Quimby  v.  Public  Service 
Commission,  223  N.  Y.  24;  Norfolk,  etc.,  R.  Co.  v. 
Pendleton,  156  U.  S.  667 ; also  Lawyers  Reports 
Annotated  1915  C,  page  261,  where  other  cases1 
are  collected. 


96 


Much  of  the  authority  cited  in  support  of  our 
position  at  this  point  may  he  applied  in  another 
way  where  we  later  urge  that  the  power  of  a State 
to  create  a corporation  may  not  be  destroyed  by 
Congress. 

Yet,  treating  the  question  now  strictly  as  one 
of  property,  it  is  worth  while  to  determine 
whether  Congress1  should  be  charged  with  having 
impaired  this  charter  contract  and  whether  Con- 
gress has  power  to  do  so. 

The  purpose  of  Congress  to  violate  this  con- 
tract should  not  be  implied  or  derived.  So  amaz- 
ing a charge!  should  be  sustained  by  the  most 
direct  and  unmistakable  language  in  the  Federal 
Statutes. 

Passing  from  purpose  and  intention  to  power, 
we  submit  that  Congress  may  not  forever  destroy 
the  rights  of  the  State  in  a contract,  under  an 
unlimited  and  interminable  exercise  of  its  war 
powers. 

There  are  dicta  to  the  general  effect  that  Con- 
gress may  impair  the  obligationls  of  Contracts, 
because  at  the  time  of  the  adoption  of  the  Con- 
stitution only  the  States  were  specially  restrained 
and  Congress  was  not. 

“ Sinking  Fund  Cases,  (1878),  99  U.  S.  718. 
See  also  Mitchell  v.  Clark,  (1884),  110  U.  S. 
643;  Legal  Tender  Cases,  (1870),  12  Wall 
U.  S.  529 ; Evans-Snider-Buel  Co.  V. 
McFadden,  (C.  C.  A.  1900)  105  Fed.  Rep,  297; 
Michigan  Cent.  R.  R.  Co.  v.  Slack,  (1876)  22 
Int.  Rev.  Rec.  337,  17  Fed.  Cas.  No.  9,  527a, 
affirmed  Michigan  Cent.  R.  Co.  v.  Slack, 
(1879)  100  U.  S.  595;  Evans  v.  Eaton,  (1816), 
Pet.  (C.  C.)  322,  8 Fed.  Cas.  No.  4,559; 
Bloomer  v.  Stolley,  (1850)  5 McLean  (U.  S.) 


97 


158,  3 Fed.  Cas.  No.  1,559;  Hardeman  v. 
Downer,  (1869)  39  Ga.  425;  Jones  v.  Harker, 
(1867)  37  Ga.  503;  Black  v.  Lusk  (1873)  69 
111.  70." 


On  the  other  hand  the  contrary  has  just  as 
strongly  been  said. 

Hepburn  v.  Griswold , 8 Wall.  603,  623. 

Sinking  Fund  Cases,  99  U.  S.  700', 
718-719. 

St.  Anthony  Falls  Water  Power  Co.  v. 
St.  Paul  Water  Commissioners , 168 
U.  S.  372. 

Legal  Tender  Cases,  2 Wall.  457  at  581. 

Loan  Association  v.  Topeka,  20  Wall. 
655  at  663-664. 

Fletcher  v.  Peck , 6 Cranch  87. 

Madison  had  denounced  such  laws  as  “ con- 
trary to  the  first  principles  of  the  social  compact 
and  every  principle  of  sound  legislation,"  Plant- 
ers Bank  v.  Sharp,  6 How.  301,  319.  One  reason 
why  the  states  had  been  specially  restricted  in 
Article  10  was  because  of  outrages  upon  aliens 
and  because  the  impairment  of  agreements'  with 
the  British  Government  had  endangered  inter- 
national relations,  Elliott,  Vol.  5,  pp.  127,  171, 
207,  546.  The  convention  had  rejected  Mr.  Gerry 
resolution  made  on  September  14th,  to  put  a like 
prohibition  on  Congress. 

Yet  this  does  not  necessarily  mean  that  author- 
ity had  been  delegated  to  the  Nation  to  commit  an 
act  malum  in  se  and  that  National  honor  re- 
strained only  local  greed. 


25 


98 


If  the  prohibition  on  Congress'  does1  not  rest 
upon  first  principles,  the  5th  amendment  with  the 
expanded  interpretation  of  “ due  process  ” is 
now  a (sufficient  restraint. 

This  the  Court  will  recall  provides1  in  part : 

“ * * * * nor  shall  any  person  * * * 

be  deprived  of  life,  liberty  or  property  with- 
out due  process  of  law;  nor  shall  private 
property  be  taken  for  public  use  without  just 
compensation.” 

Our  property  in  this  contract  may  not  be  pri- 
vate, but  it  is  property  of  a person  protected  from 
taking  within  the  meaning  of  due  process.  It  is 
not  unusual  that  where  the  limited  meaning  of  one 
clause  of  the  Constitution  does  not  give  protec- 
tion, the  general  provisions  of  another  may  be  re- 
sorted to.  See  Schollenberger  v.  Pennsylvania, 
171  U.  S.  1,  where  the  sale  of  oleomargarine  was 
protected  under  the  commerce  clause,  although  in 
the  earlier  case  of  Poivell  v.  Pennsylvania,  127  U. 
S.  678,  the  other  provisions  were  found  insufficient 
to  give  protection  against  absolute  regulation. 

The  protection  of  the  Federal  Bill  of  Rights 
has  been  held  repeatedly  to  apply  to  Congress  and 
that  its  provisions  are  not  part  of  the  privileges 
and  immunities  of  citizens  guaranteed  as  against 
the  states  in  the  14th  Amendment.  Maxwell  v. 
Dow,  176  U.  S.  581;  Twining  v.  New  Jersey,  211 
U.  S.  78.  The  states  were  restricted  as  to  taking 
property  particularly  then,  only  by  Article  10, 
until  the  14th  Amendment  was  adopted.  Since 
that  time  the  meaning  of  due  process  in  that 
amendment  had  received  the  widest  application. 

It  was  finally  decided  that  under  due  process1, 


99 


provided  for  in  the  14th  Amendment,  property 
could  not  be  taken  by  a State  without  compensa- 
tion. Missouri  Co . v.  Nebraska , 164  U.  S.  403, 
417 ; Chicago  Co.  v.  Chicago , 166  U.  S.  226,  241. 
It  was  held  that  under  due  process'  in  the  5th  and 
14th  Amendments  neither  the  States'  nor  the 
United  States  could  interfere  with  the  liberty  of 
contract.  Adair  v.  United  States,  208  U.  S.  161; 
Lochner  v.  New  York,  198  U.  S.  45;  Coppage  v. 
Kansas,  236  U.  S.  1.  If  due  process  protects'  the 
liberty  to  make  a contract,  it  must  protect  it  when 
it  is  made. 

Due  process  in  the  5th  and  14th  Amendments 
has  come  to  mean  the  same  thing.  United  States 
v.  Armstrong , 265  Fed.  683,  690,  and  now  protects 
all  property  against  both  the  states  and  the 
United  States.  See  particularly  the  dissenting 
opinion  in  Wight  v.  Davidson,  181  U.  S.  371,  at 
387. 

The  State  is  a person  under  the  analogy  of  the 
decisions  that  a private  or  municipal  corporation 
is  a person.  The  charter  contract  was  made  upon 
behalf  of  all  the  people  and  all  the  citizens  of  the 
State.  Their  interest  represented  by  the  State  is 
entitled  to  the  protection  of  the  Constitution.  The 
court  will  perhaps  take  judicial  notice  of  the  fact 
that  the  state  pays  out  money  each  year  for  the 
railroad  fares'  of  its  officers'  and  employees,  thus 
giving  the  State  a real  property  interest  in  the 
charter  fare,  as  was1  recognized  in  regard  to  tele- 
phones used  by  a State  in  Dakota  Central  Tele- 
phone Co.  v.  State  of  South  Dakota,  250  U.  S.  163 
at  180. 

In  one  of  the  first  great  contract  cases,  Fletcher 
v.  Peck,  6 Cranch  87,  it  was1  held  that  the  contract 


100 


clause  applies  to  the  states  themselves  and  for- 
bids the  impairment  of  their  own  contracts,  as 
well  as  those  of  other  persons1,  whether  executory 
or  executed.  It  seems  there  is  a reciprocal  obli- 
gation under  any  proper  conception  of  property. 
What  the  State  may  not  do  itself  it  ought  not  to 
be  made  to  suffer.  Certainly  the  State  ’&  interest 
in  this  contract  is  as  great  as  the  city ’s  in  the 
Quimby  case  supra. 

Where  learned  justices  have,  as  we  submit,  with 
lack  of  vision  as  to  the  development  of  due  pro- 
cess, said  that  Congress  could  violate  contracts, 
this  was  nowhere  necessary  to  the  decision  of  the 
case.  In  all  such  cases  Congress  was  exercising 
some  primary  or  regulatory  power  complete  in 
itself  and  to  the  operation  of  which  all  contracts 
must  submit,  even  under  the  laws  of  a State. 

Even  though  the  State’s  right  in  this  charter 
is  not  based  upon  property,  its  right  should  be 
recognized  in  its  power. 

Aside  from  any  property  interest  the  State  may 
have  in  this  charter,  the  power  of  the  State  to 
regulate  rates  springs1  generally  from  its  police 
power  ever  common  carriers1,  whether  corporate 
creatures  or  not,  “ Inherently  the  power  of  a 
State  to  fix  rates  to  be  charged  for  intrastate  car- 
riage or  transmission  is  in  its1  nature  but  deriva- 
tive, since  it  arises  from  and  depends1  upon  the 
duty  of  those  engaged  in  intrastate  commerce  ito 
charge  only  reasonable  rates  for  the  services  by 
them  rendered  and  the  authority  of  the1  State  to 
exact  a compliance  with  that  duty.”  Dakota 
Cent.  Tel.  Co.  v.  South  Dakota , 250  U.  S1.  163,  187. 
It  has  been  said  that  this  police  power  is  exclu- 
sive to  the  states,  rather  than  concurrent  with  the 


101 


Federal  Grovernment.  Cooke , Commerce  Clause , 
section  55.  The  earlier  notion  that  the  reserved 
power  over  corporations  expanded  this  power  and 
permitted  the  imposition  of  unprofitable  rates  has 
been  abandoned.  Lake  Shore , etc.,  R.  R.  Co.  v. 
Smith,  173  U.  S.  685. 

Yet  in  addition  to-  this  power  of  the  State  to 
simply  regulate,  is  the  greater  power  to  create  or 
to  refuse  to  create  corporations  under  such  terms 
and  conditions  as  it  may  see  fit.  Although  a cor- 
poration, after  its  creation,  under  the  Federal 
Constitution  is  entitled  to  engage  in  interstate 
commerce,  before  its  creation  the  State  may  im- 
pose conditions  precedent,  which  if  imposed  as 
conditions  subsequent  might  be  violative  of  vari- 
ous provisions  of  the  State  or  Federal  Constitu- 
tions, as  was  the  case  in  Municipal  Gas  Co.  v. 
Public  Service  Commission,  225  N Y.  93. 

So  in  Railroad  Company  v.  Maryland,  21  Wall. 
456,  the  State  was  permitted  to  require  as  a condi- 
tion of  a charter  grant,  that  the  railroad  should 
pay  a bonus  on  its  earnings  from  interstate  as 
well  ais  state  business'  to  the  State  of  Maryland. 
See  also  Horn  Silver  Co.  v.  New  York , 143  U.  S. 
305,  313;  Raritan  Co.  v.  Delaware  Canal  Co.,  18 
N.  J.  E.  546.  The  State  may,  therefore,  generally 
impose  any  condition  in  return  for  the  grant  of 
a chanter. 

This  authority  of  the  State  is  like  the  u frag- 
ment of  legislative  power  ” granted  the  munici- 
palities under  Quimby  v.  Public  Service  Commis- 
sion, 223  N.  Y.  244.  The  company  cannot  com- 
plain, because  it  is  always  free  to  renounce, 

1 Osborne  v.  Florida,  164  U.  S.  650;  Pullman  Com- 
pany v.  Kansas,  216  U.  S.  54.  Congress  has  never 
26 


102 


attempted  to  control  tliis  power  and  the  authority 
in  Congress  was  expressly  denied  in  The  North- 
ern Securities  Cases , 193  U.  S'.  197. 

The  police  power  cannot  be  bargained  away 
and  when  a State  fixes  a f are  by  a condition  pre- 
cedent in  a charter  or  by  a contract,  it  is  there- 
fore not  exercising  the  police  power,  subject  to  its 
r ecogniz ed  limitation  s . 

Although  it  may  be  impracticable  for  the  appel- 
lant to  abandon  its  corporate  character  and  oper- 
ate as  a copartner  ship  or  otherwise,  it  is-  theoreti- 
cally possible.  On  the  other  hand,  if  the  burdens 
of  its  charter  here  are  too  great,  it  can  seek  incor- 
poration as  an  interstate  carrier  under  an  act  of 
Congress.  The  power  of  Congress1  to  grant  such 
a charter  seems  unquestionable.  California  v. 
Central  Pacific  R.  R.  Co.,  127  U.  S.  1.  Then  it 
might  become  subject  only  to  New  York’s  police 
power.  Reagan  v.  The  Mercantile  Trust  Co.,  154 
U.  S.  413.  For  the  present  the  benefits  of  the 
charter  cannot  be  left  to  the  appellant  and  its 
burdens1  removed  by  Congress  throughout  the1  life 
of  the  charter,  under  an  assumption  that  there  the 
railroads  business  has  expanded.  Paige  v.  Sche- 
nectady Ry.,  178  N.  Y.  102, 114.  The  power  of  the 
State  to  create  corporations  which  may  thereafter 
engage  in  interstate  commerce  is  as  fundamental 
as  the  power  of  the  State  to  regulate  foreign  cor- 
porations doing  business1  here. 

The  power  of  the  State  to  create  this  appellant 
as  a corporation  was;  reserved  to  it  under  the  10th 
Amendment.  The  Federal  Government  may  not 
say,  pursuant  to  an  unlimited  exercise  of  the  war 
powers,  what  the  status  of  the  company  shall  be 
after  the  emergency  shall  pass.  This  would  in  a 


103 


sense  be  an  exercise  of  the  power  of  eminent  do- 
main. Monongahela  Co.  v.  United  States , 148  U. 
S.  313,  depending  upon  whether  the  State’s  right 
in  the  contract  is  considered  one  of  property  or 
one  of  power. 

This  Court  Has  Jurisdiction  to  Review  the  Facts  on  which 
the  Report,  Findings  and  Order  were  Made  and  to  Set  Aside 
the  Report,  Findings  and  Order  of  the  Interstate  Commerce 
Commission  Marked  Paper  Five. 

The  plaintiffs  contend  that  said’  report,  findings 
and  order  referred  to  as  Paper  Five,  is1  null  and 
Void  for  the  following  reasons : 

First. — It  was  made  without  constitutional 
authority. 

Second. — The  Commission  acted  arbitrarily, 
unjustly  and  unreasonably  fixing  rates  contrary 
to  evidence  and  without  substantial  evidence  to 
support  its  report,  findings  and  order. 

Third. — Said  report,  findings'  and  order  were 
based  upon  a mistake  of  law. 

Fourth. — The  Commission  acted  beyond  its 
statutory  powers. 

The  facts  which  sustain  the  foregoing  conten- 
tions are  discussed  in  other  parts  of  this  brief. 
The  plaintiffs  having  sustained  the  foregoing 
contentions  this  Court  has  jurisdiction  to  review 
and  set  aside  said  report,  finding®  and  order  and 
plaintiffs’  contentions  as1  to  the  jurisdiction  of 
this  Court  to  review  the  facts  are  amply  sus- 
tained by  the  following  decisions': 

In  the  case  of  Interstate  Commerce  Commission 
v.  Union  Pacific  Railroad  and  others , 222  U.  S;.‘ 


104 


541,  Mr.  Justice  Lamar,  delivering  the  opinion  of 
the  Court,  says  at  page  546 : 

“ These  appeals  raise  the  single  question 
as  to  whether  in  making  the  45^  rate  the 
Commission  acted  within  or  beyond  its 
power.  As  the  statute  makes  its  finding 
prima  facie  correct  ( Cincinnati , etc.,  By,  v. 
Interstate  Commerce  Commission,  206  U.  S. 
142,  154)  it  will  be  more  convenient  to  con- 
sider the  case  from  the  standpoint  of  the 
carriers  who  first  insist  that  the  order  was 
void  because  made  without  evidence  or  find- 
ing that  the  50^  rate  was  unreasonable. 

“ There  has  been  no  attempt  to  make  an 
exhaustive  statement  of  the  principle  in- 
volved but  in  cases  thus  far  decided  it  has 
been  settled  that  the  orders  of  the  commis- 
sion are  final  unless  (1)  beyond  the  power 
which  it  could  constitutionally  exercise;  or 
(2)  beyond  its  statutory  power;  or  (3)  based 
upon  a mistake  of  law.  But  questions  of  fact 
may  be  involved  in  the  determination  of  ques- 
tions of  law  so  that  an  order  regular  on  its 
face  may  be  set  aside  if  it  appears  that 
(4)  the  rate  is  so  low  as  to  be  confiscatory 
and  in  violation  of  the  constitutional  prohi- 
bition against  taking  property  without  due 
process  of  law;  or  (5)  if  the  commission 
acted  so  arbitrarily  and  unjustly  as  to  fix 
rates  contrary  to  evidence  or  without  evi- 
dence to  support  it;  or  (6)  if  the  authority 
therein  involved  has  been  exercised  in  such 
an  unreasonable  manner  as  to  cause  it  to  be 
within  the  elementary  rule  that  the  substance 
and  not  the  shadow  determines  the  validity 
of  the  exercise  of  the  power.  * * * 

4 4 The  findings  of  the  commission  are  made 
by  law  prima  facie  true  and  this  Court  has 
ascribed  to  them  the  strength  due  to  the  judg- 
ments of  a tribunal  appointed  by  law  and  in- 


105 


formed  by  experience.  111.  Cent.  v.  I.  C.  C., 
206  U.  S.  441.  Its  conclusion  of  course  is 
subject  to  review  but  when  supported  by  evi- 
dence is  accepted  as  final  but  that  its  de- 
cision involving  as  it  does  so  many  and  such 
vast  public  interests  can  be  supported  by  a 
mere  scintilla  of  proof  — but  the  Courts  will 
not  examine  the  facts  other  than  to  deter- 
mine whether  there  was  substantial  evidence 
to  sustain  the  order, 

“ We  proceed  then  to  a consideration  of 
the  carriers ’ contention  that  the  order  was 
void  because  made  without  any  testimony 
that  the  50^  rate  of  1907  to  St.  Paul  was 
unreasonable.” 

In  another  case,  Proctor  eft  Gamble  Company  v. 
United  States  of  America,  Interstate  Commerce 
Commission  and  others,  reported  in  225  U.  S.  282, 
Mr.  'Chief  Justice  White  wrote  the  opinion,  and 
after  discussing  at  length  the  jurisdiction  of  the 
Commerce  Court,  he  says,  at  page  293,  referring 
to  section  20  or  23  of  the  Act  to  Regulate  Com- 
merce, which  sections  are  concerned  with  the  per- 
formance of  certain  duties  upon  carriers  by  the 
Act  to  Regulate  Commerce,  as  follows : 

“ The  words  of  this  second  subdivision 
are:  ‘ Second.  Cases  brought  to  enjoin,  set 
aside,  annul  or  suspend  in  whole  or  in  part 
any  order  of  the  Interstate  Commerce  Com- 
mission. ’ 

“ Giving  to  these  words  their  natural  sig- 
nificance we  think  it  follows  that  they  con- 
fer jurisdiction  only  to  entertain  complaints 
as  to  affirmative  orders  of  the  commission, 
that  is,  they  give  the  Court  the  right  to  take 
cognizance  when  properly  made  of  com- 


27 


106 


plaints  concerning*  the  legality  of  orders  ren- 
dered by  the  commission  and  confer  power 
to  relieve  parties  in  whole  or  in  part  from 
the  duty  of  obedience  to  orders  which  are 
found  to  be  illegal.” 


Still  another  casie  which  supports  the  conten- 
tion of  the  plaintiffs  is  that  of  Manufacturers  Ry. 
Co,  v.  United  States , found  in  246  U.  S.  457, 
a case  in  which  the  question  of  the  findings 
of  the  Interstate  Commerce  Commission  concern- 
ing the  reasonableness  or  unreasonablenes's  of 
rates1  was  considered  and  also  the  question  of  dis- 
crimination. Mr.  Justice  Pitney  in  writing  the 
opinion  siays  at  page  481 : 

“ Whether  a performance  or  advantage  or 
discrimination  is  undue  or  unreasonable  or 
unjust  is  one  of  those  questions  of  fact  that 
have  been  confided  by  Congress  to  the  judg- 
ment and  discretion  of  the  Commission 
(Interstate  Commerce  Commission  v.  Ala- 
bama Midland  Ry,  Co.,  168  U.  S.  144,  170), 
and  upon  which  its  decisions,  made  the  basis 
of  administrative  orders  operating  in  futuro, 
are  not  to  be  disturbed  by  the  courts  except 
upon  a showing  that  they  are  upsupported  by 
evidence,  were  made  without  a hearing,  ex- 
ceed constitutional  limits,  or  for  some  other 
reason  amount  to  an  abuse  of  power.  This1 
results  from  the  provisions  of  Sections  15 
and  16  of  the  Commerce  Act  as  amended  in 
1906  and  1910  (34  Stat.  589-591,  c.  3591;  36 
Stat.  551-554,  c.  309),  expounded  in  familiar 
decisions.  Interstate  Commerce  Commission 
v.  Ill . Cent.  R.  R . Co.,  215  U.  S.  452,  469-470; 
Interstate  Commerce  Commission  v.  Union 
Pacific  Railroad  Co.,  222  U.  S.  541,  547 ; Proc- 
tor & Gamble  Co.  v.  United  States,  225  U.  S. 
282,  297-298;  Interstate  Commerce  Commis- 


107 


sion  v.  Louisville  & Nashville  R.  R . Co.,  227 
U.  S.  88,  91,” 

To  the  same  effect  and  a more  recent  decision 
is  a case  argued  at  the  October  term,  and  decided 
November  8,  1920.  This  will  be  found  in  United 
States  Supreme  Court,  Advance  Opinions1, 
1920-21,  issued  December  1,  1920,  under  the  title 
Seaboard  Air  Line  Ry.  v.  United  States.  This 
was  an  appeal  from  the  District  Court  of  the 
United  States  for  the  Eastern  District  of  Vir- 
ginia, to  review  a decree  dismissing  the  petition 
in  a suit  to  enjoin  the  enforcement  of  an  order  of 
the  Interstate  Commerce  Commission,  regulating 
the  absorption  of  switching  charges.  Mr.  Justice 
Day  delivered  the  opinion  of  the  Court,  and  on 
page  16  of  the  Advance  Sheets  says : 

“ Moreover  the  determination  of  questions 
of  fact  is  by  law  imposed  upon  the  commis- 
sion, a body  created  by  statute  for  the  con- 
sideration of  this  and  like  matters.  The 
findings  of  fact  by  the  commission  upon  such 
questions  can  be  disturbed  by  judicial  dercee 
only  in  cases  where  their  action  is  arbitrary 
or  transcends  the  legitimate  bounds  of  their 
authority.” 

Then  follows  a long  list  of  cases  supporting 
this  contention: 

Counsel  for  plaintiffs  desires  to  beg  the  in- 
dulgence of  the  Court  and  cite  for  its  information 
a quotation  from  the  opinion  of  Chief  Justice 
White,  delivered  in  the  case  of  the  Interstate 
Commerce  Commission  v.  III.  Cent.  R.  R.,  215  U. 
S.  452,  470.  In  its  opinion  the  Court  was  con- 
sidering the  question  of  the  right  of  the  Court  to 


108 


review  an  order  of  the  Interstate  Commerce  Com- 
mission, and  on  that  subject  Chief  Justice  White 


“ The  statute  endowing  the  Commission 
with  large  administrative  functions,  and  gen- 
erally giving  effect  to  its  orders  concerning 
complaints  before  it  without  exacting  that 
they  be  previously  submitted  to  judicial  au- 
thority for  sanction,  it  becomes  necessary,  to 
determine  the  extent  of  the  powers  which 
courts  may  exert  on  the  subject. 

‘ ‘ Beyond  controversy,  in  determining 
whether  an  order  of  the  Commission  shall  be 
suspended  or  set  aside,  we  must  consider, 
a , all  relevant  questions  of  constitutional 
power  or  right;  b,  all  pertinent  questions  as 
to  whether  the  administrative  order  is  within 
the  scope  of  the  delegated  authority  under 
which  it  purports  to  have  been  made;  and, 
c,  a proposition  which  we  state  inde- 
pendently, although  in  its  essence  it  may  be 
contained  in  the  previous  one,  viz.,  whether, 
even  although  the  order  be  in  form  within 
the  delegated  power,  nevertheless  it  must  be 
treated  as  not  embraced  therein,  because  the 
exertion  of  authority  which  is  questioned  has 
been  manifested  in  such  an  unreasonable 
manner  as  to  cause  it,  in  truth,  to  be  within 
the  elementary  rule  that  the  substance,  and 
not  the  shadow,  determines  the  validity  of 
the  exercicse  of  the  power.  Postal  Telegraph 
Cable  Company  v.  Adams , 155  U.  S.  688, 
698.” 

Therefore,  it  will  be  seen  that  this  Court  does 
have  jurisdiction  to  review  the  orders  and  de- 
cisions of  the  Interstate  Commerce  Commission 
and  the  f acts  on  which  it  bases  its1  findings1,  orders 
and  reports. 


109 


The  Special  Situation  of  The  Long  Island  and  Staten 
Island  Railroads  and  Other  Roads  Situated  Entirely  Within 
the  State. 

As  to  the  Long  Island  Railroad  and  other  roads 
of  the  same  class  the  application  of  the  principles 
above  outlined  naturally  falls  into  two  categories. 

First,  there  is  the  question  of  the  alleged  dis- 
crimination between  interstate  and  intrastate 
rates  on  the  railroad  itself,  i.  e.,  whether,  by  rea- 
son of  the  fact  that  purchasers  of  interline  tickets 
good  over  the  lines  now  have  to  pay  3.6  cents  per 
mile  instead  of  3 cents  per  mile,  there  arises  such 
a discrimination  that  the  Federal  authorities  are 
justified  in  interfering. 

Second,  there  is  the  question  of  the  alleged  dis- 
crimination between  the  intrastate  rates  on  the 
lines  as  compared  with  similar  rates  on  similar 
traffic  interstate  to  the  common  point,  Manhattan 
Island,  from  points  in  New  Jersey  and  Con- 
necticut. 

These  questions  must  be  considered  separately. 

A.  There  is  no  discrimination  between  inter- 
state and  intrastate  traffic  on  the  railroads  which 
would  justify  the  interference  of  the  Interstate 
Commerce  Commission . 

In  the  first  place,  they  DO  NO  INTERSTATE 
PASSENGER  BUSINESS  in  any  practical  sense 
of  the  term. 

As  is  indicated  by  any  authoritative  map  of  New 
York  City,  Queens  borough  is  served  by  three 
railroads  and  several  systems  of  trolley  lines. 
The  three  railroads  are  the  Long  Island  Rail- 
road, the  Brooklyn  Rapid  Transit  Railroad  and 
the  Interborough  Rapid  Transit  Railroad. 


28 


110 


The  Long  Island  runs  on  a private  right  of  way 
in  the  main,  while  the  other  two  roads  run  mainly 
over  or  under  public  highways. 

The  principal  business  of  all  three  roads  in  New 
York  City  is  the  carrying  of  passengers  to  and 
from  work  and  pleasure  in  the  heart  of  New  York. 
They  all  three  compete  directly  for  the  commut- 
ing and  local  business  of  the  territory  served. 
None  of  them  carry  any  passengers  outside  of 
New  York  Btate. 

The  Interborough  Railroad  has  stations  at  the 
terminals  of  the  following  interstate  railroads: 
The  Hudson  and  Manhattan  Company,  the  Penn- 
sylvania Railroad,  the  New  York  Central  Rail- 
road, the  New  York,  New  Haven  and  Hartford 
Railroad,  and  the  New  York,  Westchester  and 
Boston  Railroad,  The  Long  Island  Railroad  has 
one  of  its  terminals  in  Pennsylvania  Station  and 
connects  there  and  at  three  other  points  — Flat- 
bush  Avenue,  Woodside  and  Hunterspoint  Ave- 
nue — with  the  Interborough  Rapid  Transit  Com- 
pany, while  the  Brooklyn  Rapid  Transit  Railroad 
connects  twice  with  the  lines  of  the  Hudson  and 
Manhattan  Companies  and  at  numerous  points 
with  the  lines  of  the  Interborough  Rapid  Transit 
Company,  which,  in  turn,  connects  with  interstate 
railroads  at  the  points  above  mentioned. 

No  doubt  many  passengers  on  all  three  rail- 
roads, particularly  the  Interborough,  transfer  at 
these  connecting  points  to  interstate  carriers,  but 
the  amount  of  such  traffic  is  not  ascertainable  and 
is  at  any  rate  only  incidental  to  the  main  business 
of  these  roads,  which  is  intrastate  commuting 
business  from  the  suburban  sections  of  New  York 
City  to  the  heart  of  the  city.  It  is  not  directly 


Ill 


claimed  that  this  sort  of  traffic  constitutes  the 
supposed  interstate  business  of  the  Long  Island. 

The  Long  Island  Railroad,  by  arrangement  with 
other  railroads,  claims  to  stand  ready  to  sell  inter- 
line tickets,  but  the  sale  of  such  tickets  has  been 
negligible  except  during  the  war  period  when 
troop  movements  were  heavy  between  camps  on 
Long  Island  and  other  points  throughout  the 
country,  was  and  is  negligible. 

The  only  statement  by  the  railroad  in  regard 
to  the  amount  of  its  interstate  business  is  found 
in  the  affidavit  of  Peter  H.  Woodward  that 
“ about  twenty  per  cent  of  the  gross  revenue 
of  The  Long  Island  Railroad  Company  is  derived 
from  interstate  transportation.” 

No  figures  are  given  as  to  the  amount  or  pro- 
portion of  interstate  freight  or  passenger  traffic 
separately.  As  Justice  Benedict  states  in  his 
opinion  “ The  company  could  have  furnished 
them  but  it  has  not  done  so.  ’ ’ 

This  by  itself  is  almost  sufficient  proof  of  the 
negligible  character  of  the  interstate  passenger 
traffic  which  alone  is  in  question  here  as  it  was 
in  Illinois  Central  R.  R.  v.  P.  U . C.,  245  U.  S.  493. 

In  corroboration  of  these  figures  we  have  the 
testimony  of  the  witness  Adikes,  who  has  lived  in 
Jamaica  since  1855,  and  been  interested  in  transit 
problems  in  Queens  since  1880.  He  said  (p.  142) : 

“ Q.  In  your  own  residence  on  Long 
Island,  and  your  large  acquaintance  there, 
have  you  ever  known  of  any  person  buying 
an  interstate  ticket  on  the  Long  Island  Rail- 
road to  a point  outside  of  the  State? 

A.  I do  not  know  of  anybody. 

Q.  Would  you  say  from  your  knowledge  of 
the  habits  of  the  people  in  Queens  County, 


112 


that  it  is  or  is  not  a custom  for  any  large 
proportion  of  those  inhabitants  to  buy  inter- 
state tickets  on  Long  Island,  for  journeys 
outside  of  the  State? 

A.  Well,  I travel  considerably  myself  and 
my  family  too,  and  I have  never  heard  of 
them,  or  I have  never  heard  of  tickets  being 
sold,  or  a custom  made  of  tickets  being  sold 
at  the  Long  Island  depot  for  stations  beyond 
the  State  of  New  York.” 

When  a man  who  has  lived  in  Queens  65  years 
and  has  been  a considerable  traveller,  never  even 
heard  that  the  Long  Island  sells  such  tickets, 
there  is  not  much  reasonable  possibility  that  a 
change  in  their  cost  would  affect  the  sale  of  them. 

So  that  it  may  be  said  finally  and  conclusively 
that  the  interline  business  on  the  Long  Island  is 
negligible  even  without  any  deduction  for  that 
part  of  the  interline  business  that  does  not  go 
outside  of  New  York  State. 

The  total  elimination  of  such  a negligible 
amount  of  interstate  business  would  not  warrant 
the  interference  of  the  Interstate  Commerce  Com- 
mission. It  is  well  settled  that  discrimination 
must  be  substantial  and  material  to  warrant  Fed- 
eral interference  and  the  appropriate  proof  of 
substantial  discrimination  is  loss  of  business 
thereby. 

This  was  the  very  reason  underlying  the  re- 
versal of  the  Commission’s  order  in  the  Illinois 
case  ( Illinois  C.  R.  Co.  v.  P.  U.  C 245  U.  S.  493), 
the  Court  saying  (p.  507) : 

a There  is  no  finding  that  this  traffic 
extends  in  appreciable  volume  to  all  sections 
of  Illinois.  As  to  some  sections  its  volume 
may  be  very  large  and  as  to  others  almost 


113 


or  quite  negligible . At  best  the  reports  (of 
the  Commission)  leave  the  matter  uncer- 
tain. ’ ’ 

The  very  words  ‘ 4 undue  ’ ’ and  ‘ ‘ unreason- 
able ” import  this  essential  factor.  This  is  em- 
phasized in 

Interstate  C.  C.  v.  Baltimore  & 0.  R . 
R.,  145  U.  S.  263. 

Also  in  the  Second  Employer's  Liability  cases, 
223  U.  S.  1,  the  Court,  in  analyzing  and  defining 
the  power  of  the  Federal  Government  under  the 
commerce  clause,  said  (p.  47) : 

u This  power  * * * extends  incident- 

ally to  every  instrument  and  agent  by  which 
such  commerce  is  carried  on,  may  be  exerted 
to  its  utmost  extent  over  every  part  of  such 
commerce  and  is  subject  to  no  limitations 
save  such  as  are  prescribed  in  the  Constitu- 
tion. But  of  course  it  does  not  extend  to 
any  matter  or  thing  which  does  not  have  a 
real  or  substantial  relation  to  some  part  of 
such  commerce 

And  the  recent  cases  of  the  C ovington-Cincin- 
nati  Street  Railway  {supra)  emphasize  the  same, 
saying  as  to  the  very  severe  statute  in  that  case 
(p.  469) : 

“ The  regulation  of  the  act  affects  inter- 
state business  only  incidentally  and  does  not 
subject  it  to  unreasonable  demands.” 

Under  these  decisions  the  normal  volume  of  in- 
terline business  on  the  Long  Island  is  negligible 
and  would  not  warrant  any  action  by  the  Com- 
29 


114 


mission.  Moreover,  there  is  in  this  case  no  scin- 
tilla of  evidence  that  even  the  smallest  portion  of 
this  negligible  so-called  interstate  business  has 
been  adversely  affected  in  the  least.  The  inter- 
state rates  were  increased  on  August  26,  1920. 
The  railroad’s  affidavits  in  this  case  were  sub- 
mitted on  December  11,  1920.  Certainly  if,  in  the 
three  and  a half  months  which  elapsed  while  the 
higher  interstate  rates  were  in  effect,  there  was 
any  diminution  in  the  sale  of  interstate  tickets  on 
the  Long  Island,  it  would  have  so  stated  in  its 
opposition  to  this  injunction.  But  not  one  word 
do  we  find  in  regard  to  it. 

Yet  such  proof  is  absolutely  necessary  as  a pre- 
liminary to  the  order  of  the  Commission.  There 
must  be  proof  that  there  is  a diminution  of  traffic 
and,  as  was  said  in  Minnesota  Rate  cases  {supra, 
p.  390),  the  loss  must  be  shown  to  have  been  the 
“ necessary,  immediate  and  direct  effect  ” of  the 
change  of  rates. 

Such  proof  was  present  in  every  case  prior  to 
the  present  where  the  power  of  the  Commission 
was  successfully  invoked. 

For  instance,  in  the  Illinois  case,  when  it  was 
before  this  Commission, 

Business  Menfs  League  of  St.  Louis  v. 
Atchison , T.  & S.  F.  By.  Co.,  41 
L C.  C.  13, 19, 

the  facts  were  stated  in  the  report  as  follows : 

“ The  fare  between  St.  Louis  and  Chicago 
before  July  1,  1907,  was  $7.50.  From  that 
date  to  December  1,  1914,  $5.80,  and  it  is 
now  $7.50.  The  fare  between  East  St.  Louis 
and  Chicago  has  been  $5.62  for  about  9 


115 


years,  so  that  whereas  there  existed  a differ- 
ence in  fare  as  between  the  two  cities  of  18 
cents,  that  difference  is  now  $1.88.  As  a 
consequence  of  this  disparity  in  fares,  large 
numbers  of  passengers  from  St.  Louis  to 
Illinois  points  purchase  tickets  from  St. 
Louis  to  East  St.  Louis  for  25  cents,  there 
they  buy  tickets  from  East  St.  Louis  to  their 
destinations  in  Illinois  at  the  fares  whose 
maximum  is  fixed  at  2 cents  a mile  by  the 
Illinois  Legislature.’ ’ 

The  Commission  went  on  to  give  figures  of  the 
large  increase  in  the  sale  of  bridge  tickets  between 
St.  Louis  and  East  St.  Louis  and  the  large  de- 
crease in  the  sale  of  interstate  tickets  between  St. 
Louis  and  points  in  Illinois,  that  appeared  in  com- 
paring sales  for  the  period  just  before  and  just 
after  the  increase  in  interstate  rates. 

Indeed,  in  one  of  the  most  recent  of  the  cases 
following  the  decision  herein, 

Wisconsin  Passenger  Fares,  59  ICC. 
391, 

the  Commission  itself  notes  in  its  report  certain 
facts  which  justified  its  action  as  to  intrastate 
rates  in  that  state,  saying  (p.  394) : 

“As  tending  to  show  undue  preference  of 
or  prejudice  to  localities,  and  that  the 
through  interstate  fares  are  being  defeated, 
respondents  introduced  an  exhibit  from 
which  it  appears  that  during  the  period 
August  1 to  14,  1920,  inclusive,  1,367  tickets 
were  sold  from  Marinette,  Wis.,  to  12  sta- 
tions in  Wisconsin  on  The  Chicago  & North 
Western,  while  during  the  same  period  in 
September  2,021  tickets  were  sold,  an 
increase  of  47.7  per  cent.  During  the  same 


116 


periods  479  and  357  tickets,  respectively, 
were  sold  from  Menominee,  Mich.,  to  the 
same  stations,  a decrease  of  25.4  per  cent. 
Marinette  and  Menominee  are  on  opposite 
sides  of  the  Menominee  River.  From  Hur- 
ley, Wis.,  to  10  stations  in  Wisconsin  on  the 
Chicago  & North  Western,  713  tickets  were 
sold  during  the  period  August  1 to  14,  1920, 
inclusive,  and  964  during  the  corresponding 
period  in  September,  an  increase  of  35.2  per 
cent.  From  Ironwood,  Mich.,  a point 
directly  opposite  Hurley,  to  the  same  sta- 
tions, 953  tickets  were  sold  during  the  August 
period  and  601  during  the  September  period 
a decrease  of  36.9  per  cent.  During  the 
period  August  1 to  21,  1920,  inclusive,  the 
tickets  sold  and  cash  fares  collected  between 
Ashland,  Wis.,  and  Duluth,  Minn.,  and 
between  Ashland  and  Superior,  Wis.,  were 
1,624  and  842  respectively.  During  the  same 
period  in  September  the  figures  were  1,280 
and  1,152  respectively. 

“ A direct  result  of  the  practice  of  buy- 
ing passenger  tickets  again  at  or  near  state 
lines,  thereby  defeating  the  through  inter- 
state fares,  is  to  convert,  so  far  as  the  reve- 
nues of  the  carriers  are  concerned,  interstate 
commerce  into  intrastate  commerce.  It  also 
results,  where  there  are  two  or  more  routes 
between  two  given  points,  in  passengers 
using  the  route  which  has  the  longest  mile- 
age within  the  state  carrying  the  lower  intra- 
state fare.  For  example,  a passenger  from 
Milwaukee  to  St.  Paul  on  the  Chicago  & 
North  Western  can  purchase  an  intrastate 
ticket  to  Hudson,  Wis.,  for  $9.14  and  an 
interstate  ticket  from  Hudson  to  St.  Paul 
for  70  cents,  a total  of  $9.84.  The  passenger 
on  the  Chicago,  Milwaukee  & St.  Paul,  who 
desires  to  pursue  a like  practice  will  pur-- 
chase  an  intrastate  ticket  to  La  Crosse,  Wis., 


117 


for  $5.91  and  an  interstate  ticket  from  La 
Crosse  to  St.  Paul  for  $4.77,  a total  of  $10.68, 
or  84  cents  higher  than  the  combination  via 
the  Chicago  & North  Western.  The  through 
interstate  fare  from  Milwaukee  to  St.  Paul, 
via  both  routes  is  $11.67.  ” 

This  is  consonant  with  the  proof  always  con- 
sidered necessary  to  justify  such  interference. 

In  the  Long  Island  case  not  only  is  there  no 
proof  such  as  this  but  everything  points  to  the 
conclusion  that  no  proof  could  be  adduced  that 
would  show  substantial  discrimination. 

As  to  the  Staten  Island  Company  the  case  is 
even  worse.  The  only  allegation  as  to  the  amount 
of  its  interstate  traffic  is  as  follows : 

“ That  analysis  of  the  accounts  of  the 
defendant  Staten  Island  shows  that  of  said 
defendants*  total  transportation  revenue, 
about  fifty  per  cent  thereof  is  derived  from 
interstate  commerce  and  the  balance  from 
intrastate  commerce.  ’ * 

There  is  no  allegation  as  to  the  amount  of  in- 
terstate passenger  business  nor  is  there  any  alle- 
gation that  there  has  been  any  diminution  of  such 
business  by  reason  of  the  increase  of  rates. 

It  also  appears  that  the  Staten  Island  did  not 
join  in  the  petition  to  the  Interstate  Commerce 
Commission  which  resulted  in  the  order  relied  on 
and  that  no  proof  whatever  was  offered  in  regard 
to  its  operations  in  the  hearings  which  preceded 
the  order. 

The  railroads  cannot  claim  that  every  pas- 
senger who  leaves  New  York  State  after  traveling 


30 


118 


on  their  lines  is  an  interstate  passenger  while  on 
their  lines . 

In  Gulf  C . & S.  F.  Ry.  Co.  v.  Texas,  204  TJ.  S. 
403,  certain  corn  had  been  shipped  from  Hudson, 
So.  Dakota,  to  Texarkana,  Texas.  There  it  re- 
mained five  days,  passing  into  the  ownership  of  a 
resident  of  that  city.  He  then  shipped  it  in  the 
same  cars  to  Goldthwaite,  Texas.  The  Court  de- 
cided that  in  the  journey  from  Texarkana  to 
Goldthwaite,  Texas,  it  was  in  intrastate,  not  inter- 
state commerce.  In  the  course  of  the  opinion  the 
Court  said  (p.  413) : 

“ In  this  respect  there  is  no  difference 
between  an  interstate  passenger  and  an  inter- 
state transportation.  If  Hardin,  for  instance, 
had  purchased  at  Hudson,  a ticket  for  inter- 
state carriage  to  Texarkana,  intending  all 
the  while  after  he  reached  Texarkana  to  go 
on  to  Goldthwaite,  he  would  not  be  entitled 
on  his  arrival  at  Texarkana  to  a new  ticket 
from  Texarkana  to  Goldthwaite  at  the  pro- 
portionate fraction  of  the  rate  prescribed  for 
carriage  from  Hudson  to  Goldthwaite.  The 
one  contract  of  the  railroad  companies  hav- 
ing been  finished,  he  must  make  a new  con- 
tract for  his  carriage  to  Goldthwaite  and  that 
would  be  subject  to  the  law  of  the  State 
within  whch  that  carriage  was  to  be  made.’’ 

This  case  was  distinguished  at  some  length  in 

Ohio  R.  R.  Comm.  v.  Worthington,  225 

U.  S.  101, 

which  was  a case  involving  coal  shipped  to  ships 
in  Huron,  Ohio,  on  which  ships,  as  the  Court  said 
(p.  108),  it  was  “ necessarily  99  shipped  to  points 
outside  the  State. 


119 


It  was  further  distinguished  in  the  similar 
freight  cases  of 

Texas  and  N.  0.  R . R.  Co.  v.  Sabine 
Tram . Co.,  227  U.  S,  Ill; 

Louisiana  R.  R.  Comm.  v.  Texas  & P. 
Ry.,  229  U.  S.  336. 

But  it  has  never  been  overruled  and  is  cited 
with  approval  by  Justice  Hughes  in 

Chicago  M.  & St.  P.  Ry.  v.  Iowa , 233 
U.  S.  334, 

as  well  as  by  Justice  Vandeventer  in 

Pa.  R R.  Co.  v.  Mitchell  Coal  & Coke 
Co.,  238  U.  S.  251. 

The  distinction  in  all  cases  seems  to  be  that  the 
mere  fact  that  there  are  two  tickets  or  bills  of 
lading,  one  interstate  and  one  intrastate,  does  not 
conclude  the  inquiry.  It  does  not  prove  the  com- 
merce to  be  intrastate.  A fortiori,  it  does  not 
prove  it  to  be  interstate. 

The  only  rule  is  that  the  decision  must  rest 
upon  the  facts  of  the  case  in  question. 

Thus  in  Pacific  Co.  v.  Arizona,  249  U.  S.  236,  a 
travelling  show  was  held  to  be  in  intrastate  com- 
merce, though  it  was  the  intention  of  its  manager 
to  continue  on  to  another  'State  and  he  had  written 
for  transportation  which  he  had  not  received  when 
the  question  arose. 

In  Public  Utilities  Commission  v.  Landon,  249 
U.  S.  236,  natural  gas  sold  by  local  companies  was 
held  to  be  subject  to  State  regulation  though  it 


120 


came  from  without  the  State.  The  Court  said 
(p.  245) : 

“ Interstate  commerce  is  a practical  con- 
ception and  what  falls  within  it  must  he 
determined  upon  consideration  of  established 
facts  and  known  commercial  methods.” 

Similarly  in  Arkadelphia  Co.  v.  St.  Louis  S.  W. 
By.  Co.  (supra),  it  was  held  that  rough  wood 
brought  intrastate  to  be  milled  with  the  intention 
of  shipping  95  per  cent,  of  it  out  of  the  state  was 
not  in  interstate  commerce  until  it  left  the  mill. 

The  question  depends,  of  course,  upon  when  the 
subject  actually  enters  upon  its  interstate  jour- 
ney. It  is  said  in  Illinois  C.  R.  Co.  v.  Fuentes, 
etc.,  236  U.  S,  67: 

“ When  freight  actually  starts  in  the 
course  of  transportation  from  one  state  to 
another  it  becomes  a part  of  interstate  com- 
merce. 9 9 

That  is  the  question  brought  up  by  the  possible 
claim  of  the  railroad  company  that  all  passengers 
who  intend  to  go  outside  the  state  are  in  inter- 
state commerce,  even  though  riding  on  a local 
ticket  good  only  in  New  York.  But  this  is  obvi- 
ously unsound,  for  if  it  be  true,  then  the  Inter- 
borough  Rapid  Transit  Railroad  and  the  Brook- 
lyn Rapid  Transit  Railroad  are  many  times  as 
great  carriers  of  interstate  passengers  as  are  de- 
fendants. For  of  the  Long  Island  passengers 
who  intend  to  go  out  of  the  State,  only  the  limited 
number  who  come  into  Pennsylvania  Station 
from  the  East  and  go  out  of  the  Pennsylvania 
to  the  West,  can  avoid  using  the  rapid  transit 


121 


lines  on  part  of  their  journey.  The  rapid  transit 
railroads,  on  the  other  hand,  connect  with  all  rail- 
roads except  the  Central  Railroad  of  New  Jersey, 
and  the  West  Shore,  either  directly  or  by  con- 
nection with  the  Hudson  and  Manhattan  lines. 

It  can  hardly  be  seriously  contended  that  those 
who  ride  on  the  subway  to  their  trunk  line  term- 
inal for  a journey  without  the  State,  are  in  inter- 
state commerce  as  soon  as  they  enter  the  subway. 
Yet  the  allowance  of  such  a contention  would 
involve  just  this. 

The  distinction  seems  to  lie  in  the  construction 
to  be  given  to  the  words  4 4 when’ 9 a person 
“ actually  starts  in  the  course  of  transportation 
from  one  state  to  another  ” ( Illinois  C.  R.  Co.  v. 
Fuentes,  23 6 U.  S.  67).  Sentimentally  speaking,  he 
“ actually  starts  ” when  he  kisses  his  loved  ones 
good-bye  and  leaves  his  house  either  on  foot  or  to 
enter  some  sort  of  conveyance.  This,  however, 
cannot  be  the  meaning  intended.  No  one  could 
consider  that  Congress  had  the  right  to  regulate 
taxicabs  in  Jamaica,  Long  Island,  because  some 
people  take  them  from  their  home  to  the  station 
or  the  subway,  when  about  to  start  on  an  inter- 
state journey. 

Similarly,  a trolley  car  would  not  be  considered 
an  interstate  carrier,  though  used  for  the  same 
purpose. 

The  real  test  seems  to  be,  when  in  the  ordinary 
course  of  human  reasoning  the  person  involved 
considers  himself  actually  and  irrevocably  started 
on  his  journey.  This  to  the  suburbanite  is  only 
when  he  enters  the  train  at  a trunk  line  terminal 
in  New  York  or  New  Jersey. 

For  instance,  suppose  a man  residing  in  Flush- 

31 


122 


in g,  New  York,  desires  to  leave  at  midnight  from 
the  Grand  Central  Terminal.  He  may  get  there 
by  any  one  of  four  ways.  If  there  is  a convenient 
train  he  may  go  by  the  Long  Island  to  Woodside, 
or  Pennsylvania  Station,  and  from  there  by  sub- 
way. This  will  cost  him  from  15  to  33  cents,  de- 
pending on  what  kind  of  ticket  he  uses  — commu- 
tation, 50-trip  or  one-way.  He  may  take  two  city 
buses  to  the  subway  at  Corona  and  go  from  there 
direct  to  Grand  Central,  at  a cost  of  15  cents.  He 
may  take  a trolley  to  the  same  subway  and  arrive 
at  Grand  Central,  at  a cost  of  10  cents,  or  he  may 
take  a trolley  to  59th  Street  and  2d  Avenue,  New 
York,  and  walk  to  Grand  Central  at  a cost  of  5 
cents.  Of  which  means  he  will  avail  himself  to  get 
to  Grand  Central,  depends  upon  his  parsimony 
and  the  time  at  his  disposal.  But  in  any  case  all 
are  put  in  the  same  category.  All  are  methods  to 
get  to  the  place,  where  in  a real  business  sense,  he 
will  start  on  his  interstate  journey. 

The  reasoning  which  moved  the  Supreme  Court 
in  Coe  v.  Errol,  116  U.  S.  517,  to  hold  taxable  by  a 
state  certain  logs  which,  while  intended  for  ship- 
ment without  the  State,  had  only  been  brought  to 
the  shipping  point,  is  particularly  apposite.  The 
Court  said  (p.  528) : 

“ It  is  true,  it  was  said  in  the  case  of  The 
Daniel  Ball,  10  Wall  557,  565:  ‘Whenever 
a commodity  has  begun  to  move  as  an  article 
of  ‘ trade  from  one  State  to  another  com- 
merce in  that  commodity  between  the  States 
has  commenced. ’ But  this  movement  does 
not  begin  until  the  articles  have  been  shipped 
or  started  for  transportation  from  one  State 
to  the  other.  The  carrying  of  them  in  carts 
or  other  vehicles,  or  even  floating  them,  to 


123 


the  depot  of  that  journey  is  all  preliminary 
work,  performed  for  the  purpose  of  putting 
the  property  in  a state  of  preparation  and 
readiness  for  transportation.  Until  actually 
launched  on  its  way  to  another  State  or  com- 
mitted to  a common  carrier  for  transporta- 
tion to  such  State,  its  destination  is  not  fixed 
or  certain.  It  may  be  sold  or  otherwise  dis- 
posed of  within  the  State,  and  never  put  in 
course  of  transportation  out  of  the  State. 
Carrying  it  from  the  farm  or  the  forest,  to 
the  depot,  is  only  an  interior  movement  of 
the  property,  entirely  within  the  State  for 
the  purpose,  it  is  true,  but  only  for  the  pur- 
pose, of  putting  it  in  the  course  of  exporta- 
tion; it  is  no  part  of  the  exportation  itself. 
Until  shipped  or  started  on  its  final  journey 
out  of  the  State  its  exportation  is  a matter 
altogether  in  fieri  and  not  at  all  a fixed  and 
certain  thing.’ ’ 

The  case  is  even  stronger  here.  For  in  the  case 
of  logs  intended  for  shipment  we  can  tell  just 
which  they  are.  But  who  can  look  into  the  minds 
of  the  millions  of  commuters  on  the  Long  Island, 
Staten  Island,  the  Interborough  or  the  B.  R.  T. 
and  tell  how  many  are  going  to  board  another 
train  after  leaving  the  one  they  are  in  to  continue 
their  journey  peihaps  to  Jersey  City?  It  is  obvi- 
ously impossible  to  tell  who  they  are,  how  many 
they  are  or  what  kind  of  tickets  they  ride  on.  It 
follows,  therefore,  that  the  only  possible  way  to 
make  every  one  in  New  York  who  desires  to  go 
without  the  State  pay  the  interstate  rate  of  3.6 
cents  per  mile  would  be  to  abolish  all  local  tickets, 
all  50-trip  tickets,  all  commutation  tickets  and 
raise  the  fare  on  the  subways  to  3.6  cents  per  mile. 

There  was  no  ground  for  action  by  Commission 


124 


in  respect  to  local  rates  on  the  defendant  rail- 
roads as  compared  with  similar  rates  on  the  New 
Jersey  roads , for  the  discrimination , instead  of 
being  in  favor  of  Long  Island,  is  actually  in  favor 
of  New  Jersey. 

Commutation  rates,  including  50-trip  rates, 
were  excluded  by  the  Interstate  Commerce  Com- 
mission because,  as  it  says  in  its  report : 

“ The  record  discloses  facts  in  the  pres- 
ence of  which  we  can  not  presume  that  the 
existing  structure  is  just  and  reasonable  in 
its  established  relationships  and  that  it 
should  be  adopted  as  the  basis  upon  which 
a general  advance  should  be  authorized.,, 

The  meaning  of  this  somewhat  cryptie  utter- 
ance is  that,  as  was  conceded  by  counsel  for  the 
railroads,  the  commutation  and  50-trip  rates  on 
the  Long  Island  Railroad  are  today  higher  than 
similar  rates  for  similar  distances  than  are  the 
rates  in  New  Jersey  in  spite  of  the  20  per  cent, 
increase  granted  in  those  rates. 

As  to  the  one  way  and  round  trip  rates  the 
situation  is  well  summed  up  by  the  testimony  of 
the  witness  Adikes,  as  follows : 

Q.  Have  you  been  interested  in  transit 
problems  and  civic  problems  in  the  Borough 
of  Queens  for  a great  many  years?  A.  I 
have. 

Q.  For  how  long?  A.  Since  1880. 

Q.  And  you  have  made  a study  of  the  con- 
ditions as  they  affect  the  people  of  Queens? 
A.  I have. 

Q.  During  that  time?  A.  To  a certain 
extent. 

Q.  You  are  a member  of  what  civic  organ- 
izations? A.  I am  a member  of  the  Queens 


125 


Chamber  of  Commerce,  and  Chairman  of 
their  transit  committee;  also  Jamaica  Board 
of  Trade  and  chairman  of  their  transit  com- 
mittee. 

Q.  Did  you  make  a study  to  some  extent 
of  the  comparative  rates  between  places  on 
Long  Island  and  places  in  New  Jersey,  prior 
to  this  20  per  cent  increase  granted  on 
August  26th?  A.  I did,  in  Jersey  and 
points  in  Queensboro. 

Q.  Did  you  find  that  there  were  discrim- 
inations in  favor  of  some  portions  of  New 
Jersey,  as  against  Long  Island  — some  por- 
tions of  Long  Island?  A.  I did,  from  40  to 
100  per  cent. 

Q.  Where  are  the  low  rates  in  New  Jersey? 
A.  From  Manhattan  to  Newark  and  to  the 
towns  adjacent  to  Newark. 

Q.  That  is,  Newark  is  the  central  point 
which  is  a focus  of  numerous  trolley  lines? 
A.  Yes,  sir. 

Q.  Since  the  increase  was  granted  to  the 
New  Jersey  Roads,  have  you  had  occasion 
to  compare  the  rates  charged  by  the  Penn- 
sylvania over  its  own  lines,  or  over  the  lines 
of  the  Hudson  & Manhattan  Railroad  Com- 
pany and  the  rates  charged  by  the  Long 
Island  Railroad  to  points  like  Hunters  Point 
Avenue  and  Woodside,  where  it  joins  the 
city  rapid  transit  system?  A.  I have. 

Q.  Is  there  still  a discrimination  in  favor 
of  New  Jersey?  A.  There  is  still  a discrim- 
ination of  20  to  80  per  cent  in  favor  of  New 
Jersey.’ ’ 

He  also  testified  that  he  had  been  active  as  a 
civic  worker  in  the  movement  which  resulted  in 
the  passage  of  Chapter  688  of  the  Laws  of  1920, 
which  aimed  to  do  away  with  the  discriminations 
against  the  Borough  of  Queens  and  that  since 


32 


126 


August  26,  1920,  as  chairman  of  the  Transit  Com- 
mittees of  the  Queensborough  Chamber  of  Com- 
merce and  of  the  Jamaica  Board  of  Trade  he 
had  filed  a complaint  with  the  Public  Service 
Commission  asking  the  enforcement  of  that  law. 

This  testimony  was  not  contradicted  and  stands 
unchallenged.  So  that  instead  of  there  being  a 
discrimination  in  favor  of  Long  Island  against 
New  Jersey,  the  discrimination  is  actually  the 
other  way.  Instead  of  New  Jersey  “ persons  or 
localities  99  complaining  that  their  rates  are 
higher  than  those  on  Long  Island  we  find  the 
entire  Borough  of  Queens  as  represented  by  two 
responsible  commercial  organizations  complaining 
bitterly  to  the  Legislature,  to  the  Public  Service 
Commission,  to  the  Interstate  Commerce  Commis- 
sion, and  now  to  the  courts  that  New  Jersey  has 
lower  rates  to  New  York  than  have  the  people  on 
Long  Island. 

The  Interstate  Commerce  Commission,  there- 
fore instead  of  taking  such  action  as  “in  its 
judgment  will  remove  99  the  discrimination,  has 
actually,  in  the  face  of  uncontradicted  evidence, 
attempted  to  increase  the  existing  discrimina- 
tion against  intrastate  traffic  from  points  on  Long 
Island  to  Manhattan. 

Surely  a more  absurd  abuse  of  the  power  to 
“ foster  and  protect  ” interstate  commerce  could 
hardly  be  imagined. 

As  to  the  defendant  Staten  Island  Rapid  Tran- 
sit Company  the  case  is  perhaps  even  more  ab- 
surd. As  has  been  pointed  out  above,  this  rail- 
road was  not  a party  to  the  proceeding,  before  the 
Interstate  Commission,  it  did  not  apply  for  an 
increase  and  absolutely  no  evidence  was  pre- 


127 


sented  before  the  Commission  or  in  this  proceed- 
ing which  would  indicate  that  its  rates  are  lower 
than  the  extremely  low  rates  prevailing  in  the 
Metropolitan  District  between  points  in  New 
Jersey  and  Manhattan  Island. 

Justice  Brandeis,  in  the  South  Dakota  case, 
American  Express  Co.  v.  Caldwell  (244  U.  S. 
617),  said  (p.  624) : 

“ Proceedings  to  remove  unjust  discrimi- 
nation are  aimed  directly  only  at  the  relation 
of  rates/’ 

In  every  Shreveport  case,  so-called,  the  State 
rates,  and  the  interstate  rates  had  their  respec- 
tive well-defined  levels,  the  State  level  being  con- 
siderably higher  than  the  interstate. 

Moreover,  it  is  conceded  in  this  case  that  this 
is  the  issue  here,  and  complainant’s  witness 
Hunter  testified. 

“ Q.  There  is  no  exception  in  your  prayer 
for  relief,  or  what  you  desire  to  accomplish 
by  this  proceeding  or  any  similar  proceeding 
— no  exception  in  favor  of  local  fares  at  any 
less  than  3.6  ? A.  No,  sir. 

“ Q.  Without  any  regard  to  what  local  con- 
ditions may  be?  A.  No;  we  think,  Judge, 
that  the  rate  fabric  of  the  country,  both  in- 
trastate and  interstate,  ought;  to  be*  on  a 
uniform  basis,  in  order  to  eliminate  all  dis- 
criminations as  between  persons  and  locali- 
ties. You  cannot  do  it  otherwise.  There  is 
no  reason  in  the  world  why  the  people  of  the 
State  of  New  York  should  be  in  a preferred 
class  against  those  who  live  in  the  State  of 
Pennsylvania.” 

And  again: 

“A.  In  other  words,  this  is  a revenue  pro- 
ducing measure.  It  does  not  run,  as  I under- 


128 


stand  it,  to  the  question  of  maximum  rates 
or  minimum  rates  or  anything  else. 

“ Q.  Regardless  of  the  justice  of  the  pres- 
ent rates,  you  want  the  20  per  cent  increase? 
A.  Yes,  that  is  the  idea.  I do  not  understand 
that  question  is  in  issue  at  all.  At  least  that 
has  been  my  understanding.’’ 

That  is  the  question  at  issue  here,  whether  the 
level  of  intrastate  rates  is  lower  than  the  level  of 
interstate  rates  and  there  is  obviously  no  basis 
laid  for  the  decision  of  that  issue. 

On  the  Long  Island  Railroad  itself  the  so-called 
interstate  rates  are  imaginary  and  ephemeral  to 
such  a degree  that  any  level  they  might  have  is 
purely  academic.  Local  rates  on  the  Long  Island 
certainly  have  no  level,  even  in  any  one  class  of 
rates. 

As  between  the  Long  Island  local  rates  and  the 
New  Jersey  local  rates,  there  can  be  no  compari- 
son of  levels,  for  there  is  no  level  in  either  case. 

In  a broad  sense  perhaps  it  may  be  said  that 
the  Commission  in 

Ex  Parte  74,  58  I.  C.  220, 

fixed  upon  the  reasonableness  of  the  local  rates 
between  New  Jersey  and  New  York.  But  in  no 
real  sense  is  this  the  fact.  What  the  Commission 
actually  did  was  to  take  such  facts  as  were  avail- 
able, though  they  were  not  satisfactory  to  the 
Commission  (pp.  228,  230)  either  as  to  value  or 
earnings,  and  to  fix  the  percentage  of  increase 
proper  for  all  the  railroads  combined  in  the  East- 
ern Group.  There  is  no  indication  in  the  opinion 
in  that  case,  and  it  is  not  believable  that  the  Com- 
mission actually  determined  in  that  case  that  all 


129 


of  the  local  New  Jersey  rates,  ranging  as  they  do 
from  1 y2  cents  to  5 cents  per  mile,  were  found  to 
be  reasonable. 

Until  this  is  done,  of  course,  there  is  no  basis 
for  finding  discrimination.  And  if  this  is  held  to 
have  been  done,  certainly  there  would  be  no 
ground  for  alleging  undue  and  unreasonable  dis- 
crimination unless  the  level  of  the  Long  Island 
rates  were  lower  than  the  lowest  rates  found  rea- 
sonable for  any  considerable  number  of  interstate 
travellers.  As  such  lowest  rates  are  considerably 
under  2 cents  per  mile,  there  was  certainly  no 
ground  for  interference  here. 

We  have  seen  that  in  each  of  the  Shreveport 
cases,  so-called,  there  was  either  as  an  original 
complainant  or  an  intervenor,  some  community 
complaining  of  loss  of  valuable  commerce  by  rea- 
son of  the  changed  relationship  of  rates. 

This  element  of  these  cases  was  emphasized  by 
Commissioner  Clark  in  his  testimony  before  the 
House  Committee: 

u This  situation  has  been  more  or  less 
troublesome.  We  have  had  a good  many 
complaints  of  undue  preference  of  State  ship- 
pers and  undue  prejudice  against  interstate 
shippers.  The  Shreveport  case  was  orig- 
inally brought  by  order  of  the  Legislature 
of  the  State  of  Louisiana  on  account  of  undue 
prejudice  believed  to  exist  against  the  ship- 
pers of  Louisiana  and  undue  preference  of 
shippers  in  Texas  under  rates  prescribed  by 
the  Texas  Commission.  Singularly  enough, 
it  was  not  very  long  until  we  had  a complaint 
from  Natchez,  Miss.,  against  the  Louisiana 
rates  prescribed  by  the  Louisiana  Commis- 
sion. We  have  had  several  complaints  from 
parties  in  Missouri  against  the  Illinois  rates 
33 


130 


and  we  have  had  complaints  from  parties  in 
Illinois  against  the  Missouri  rates.  We  have 
had  the  same  situation  presented  in  New  Eng- 
land and  from  various  parts  of  the  country.  It 
comes  from  all  sections  of  the  country  and 
it  results  from  a difference  in  point  of  view 
of  commissions  in  different  States,  although 
they  may  he  adjoining  ” (Vol.  I,  House  Com- 
mittee Proceedings,  pp.  26,  27). 


He  then  goes  on  to  speak  of  the  many  rival 
border  cities  from  whom  such  complaints  have  or 
are  apt  to  arise,  such  as : 


East  St.  Louis,  Illinois  and  St.  Louis,  Missouri 


Omaha,  Nebraska 
Kansas  City,  Kansas 
Bock  Island,  Illinois 
Bristol,  Tennessee 
Texarkana,  Texas 


and  Council  Bluffs,  Iowa 
and  Kansas  City,  Missouri 
and  Davenport,  Iowa 
and  Bristol,  Virginia 
and  Texarkana,  Arkansas. 


There  always  has  been  an  aggregation  of 
human  beings  to  complain  except  in  this  case. 
Here  we  have  the  New  York  Central  complaining 
of  what?  Witness  Vosburgh  stated  (pp.  104, 
105) : 

“ I know  that  there  has  been  considerable 
falling  off  in  the  traffic  heretofore  handled 
by  the  lines  other  than  the  New  York  Cen- 
tral, and  it  is  my  opinion  that  if  this  differ- 
ence in  fares  should  continue,  with  a differ- 
ence of  $2.25  in  favor  of  the  New  York  Cen- 
tral for  a passenger  in  a sleeping  car  between 
New  York  and  Buffalo,  it  will  have  the  effect 
of  diverting  practically  all  of  the  business 
of  the  other  lines  to  the  New  York  Central.” 

Can  the  court  imagine  Commodore  Vanderbilt 
complaining  that  conditions  were  such  that  the 


131 


New  York  Central  would  probably  get  all  of  the 
business  between  New  York  and  Albany  at  3 cents 
per  mile? 

But  of  what  did  the  Long  Island  complain? 
Nothing  so  far  as  can  be  ascertained  except  that 
the  war  is  over  and  there  are  no  troops  to  carry. 

It  is  true  that  it  has  a right  to  complain  techni- 
cally (Sec.  13,  par.  3,  Transportation  Act),  but  so 
had  every  citizen.  No  one,  however,  has  a stand- 
ing as  a complainant  unless  he  has  something  of 
which  to  complain.  It  may  be  a matter  of  regret 
to  it  that  it  can ’t  raise  its  rates  instanter,  but  that 
does  not  give  it  the  right  to  complain  without 
actual  proof  of  damage  by  reason  of  discrimina- 
tion. 

The  conclusion  inevitably  is  that,  though  this 
complaint  was  made  in  the  form  of  law  on  the 
ground  of  discrimination,  it  was  not  really  based 
on  discrimination,  and  that  the  real  basis  of  the 
application  is  the  desire  to  get  an  increase  of  rates 
without  proving  before  the  proper  State  authori- 
ties the  reasonableness  of  the  application.  In  fact 
the  reason  behind  this  is  actually  to  overthrow  the 
irksome  State  authority  and  nothing  else. 

Justice  Hughes  said  in  the  Minnesota  Rate 
cases  ( supra ),  at  page  402: 

“ Where  the  subject  is  peculiarly  one  of 
local  concern,  and  from  its  nature  belongs 
to  the  class  with  which  the  state  appropri- 
ately deals  in  making  reasonable  provision 
for  local  needs,  it  cannot  be  regarded  as  left 
to  the  unrestrained  will  of  individuals  be- 
cause Congress  has  not  acted,  although  it 
may  have  such  a relation  to  interstate  com- 
merce as  to  be  within  the  reach  of  the  Fedr- 
eral  power.” 


132 


How  much  more  is  this  the  case  where  there  is 
no  proof  that  the  rates  in  question  4 i have  such  a 
relation  to  interstate  commerce  as  to  he  within 
the  reach  of  Federal  power  ” f 

The  case  of  purely  local  rates  within  the  limits 
of  a single  city  is  eminently  and  evidently  such  a 
matter.  Moreover,  as  we  have  seen  in  this  case, 
Congress  had  neither  the  power  to  act  nor  has  it 
acted. 

New  York  is  a city  by  itself,  the  largest  in  the 
world,  and  with  the  most  acute  problems  of  con- 
gestion and  transportation.  Its  unique  character 
is  specifically  recognized  in  the  constitution  of  the 
New  York  regulatory  bodies. 

The  Public  Service  Commissions  Law  recog- 
nizes this  fact  in  establishing  (Section  3)  two 
public  service  districts,  the  First  District  con- 
sisting of  New  York  City  alone  and  the  Second 
District  comprising  the  rest  of  the  State. 

A Public  Service  Commission  is  provided  for 
each  district  and  each  commission  is  a separate 
and  independent  body  with  full  powers  of  regula- 
tion in  the  territory  confided  to  it  (Section  4). 

This  First  District  Public  Service  Commission 
also  had  confided  to  it  the  preparation  of  plans  for 
the  construction,  in  conjunction  with  (the)  city 
authorities,  of  those  subways  and  rapid  transit 
railroads  which  are  so  unique  in  the  history  of 
municipal  engineering  and  transportation  as,  in 
and  of  themselves,  to  put  New  York  entirely  in  a 
class  by  itself. 

The  fact  that  the  City  of  New  York  has  under- 
taken this  tremendous  engineering  and  govern- 
mental problem  has  a very  direct  bearing  on  the 
transportation  problem  in  the  Borough  of  Queens. 


133 


Witness  Adikes  pointed  out  that  the  city’s 
rapid  transit  railroads  parallel  in  some  oases  the 
Long  Island  tracks,  and,  in  one  case  in  particular, 
that  the  Long  Island  Railroad  is  successfully  com- 
peting with  the  city-owned  lines,  though  charging 
a higher  fare.  He  testified: 

“ Q.  Now,  from  Jamaica  to  Flathush 
Avenue,  the  Long  Island  has  a local  service? 
A.  Has  a local  service. 

“ Q Do  you  now  whether  that  was  oper- 
ated in  competition  with  the  service  on  the 
Brooklyn  Rapid  Transit  lines?  A.  It  was 
operated  in  the  middle  eighties  to  compete 
with  the  Brooklyn  Rapid  Transit  lines. 

“ Q.  The  fare  was  reduced  for  that  pur- 
pose? A.  Yes,  sir. 

“ Q.  The  fare  today  is  11  cents  from 
Jamaica  to  Flathush  Avenue?  A.  Yes,  sir. 

‘ ‘ Q.  A distance  of  a little  over  nine  miles  ? 
A.  Yes. 

“ Q.  The  fare  on  the  city  rapid  transit 
lines  from  Jamaica  to  Brooklyn  is  5 cents? 
A.  Yes. 

“ Q.  The  difference  in  fare  does  not  keep 
the. Long  Island  Railroad  from  filling  its  local 
trains,  does  it?  A.  No,  their  trains  are 
loaded.  In  fact,  they  are  overloaded  on  that 
division,  which  is  a fact,  and  which  would  be 
relieved  by  them  running  the  same  service 
over  their  Long  Island  division  to  Long 
Island  City  or  to  Woodside.” 

He  further  testified  (p.  145),  that  he  had  been 
endeavoring  as  a civic  worker  to  have  the  Long  Is- 
land Railroad  establish  a similar  local  service  at  a 
low  fare  to  Woodside  and  Hunterspoint  Avenue, 
where,  as  at  Flatbush  Avenue,  Brooklyn,  the  Long 
Island  has  a junction  with  the  city  rapid  transit 


34 


134 


lines,  and  that  Mr.  Peters,  president  of  the  Long 
Island  Railroad,  had  promised  in  1909  to  estab- 
lish such  a service,  but  had  never  done  so. 

This  gives  an  insight  into  the  peculiar  and 
unique  conditions  which  face  the  Long  Island 
Railroad,  and  the  absolute  impossibility  of  estab- 
lishing the  fares  on  that  road  on  the  basis  of  those 
fixed  for  any  other  territory.  The  people  of 
Queens,  of  course,  believe  that  if  competition  with 
the  city  rapid  transit  lines  is  voluntarily  estab- 
lished by  the  Long  Island  Railroad  one  one  line 
and  proves  profitable,  it  should  be  forced  to  estab- 
lish it  on  other  similar  lines  where  similar  condi- 
tions exist. 

This  competition  of  the  city  rapid  transit  lines 
is  so  direct  and  affects  so  vitally  the  transporta- 
tion situation  in  Queens,  that  it  far  outweighs  any 
prejudice  or  advantage  which  might  exist  in  favor 
of  Queens  and  against  New  Jersey.  If  any  parts 
of  the  Greater  City  of  New  York  actually  enjoy 
rates  which  are  discriminatory  against  New  Jer- 
sey, it  is  those  parts  in  which  the  people  are 
enabled  to  ride  on  the  city  rapid  transit  lines  for 
a 5-cent  fare  to  and  from  their  work.  If  New 
Jersey  localities  have  a complaint  against  any 
New  York  communities,  it  is  against  those,  not 
against  those  struggling  communities  in  Queens 
who  have  to  depend  upon  the  Long  Island  Rail- 
road and  to  pay  its  almost  prohibitive  fares. 

It  may  even  be  said  that  in  the  interest  of  the 
railroad  itself,  it  would  be  a fatal  mistake 
to  fix  firmly  the  precedent  that  rates  on  the 
Long  Island  Railroad  must  be  the  same  as  those 
on  commuting  railroads  in  New  Jersey.  As  time 
goes  on,  no  doubt  the  City  of  New  York  will  build 


135 


further  rapid  transit  lines,  until  the  entire 
Borough  of  Queens  is  covered  with  a net-work  of 
city-owned  lines  carrying  passengers  at  an  ex- 
tremely low  fare.  To  say  to  the  Long  Island  Bail- 
road  that  it  can  never  compete  with  those  city- 
owned  lines  might  very  conceivably  he  the  equiva- 
lent of  telling  them  that  they  could  no  longer  do 
business  in  their  most  populous  territory. 

But  whatever  the  effect  upon  the  Long  Island 
Bailroad,  the  people  of  Queens  would  suffer  by 
any  such  pronouncement. 

If  the  Long  Island  Bailroad  is  not  enabled  or 
forced  to  meet  the  competition  of  the  city-owned 
lines,  as  it  can  do,  it  would  mean  that  for  the  peo- 
ple of  Queens,  the  Long  Island  Bailroad  would  be- 
come a luxury  instead  of  a convenience  and  would 
be  maintained  not  for  the  benefit  of  the  people  at 
large,  but  for  those  few  fortunate  individuals  who 
are  able  to  pay  exorbitant  rates  for  added  con- 
venience. 

It  has  not  yet  been  contended  formally  that  the 
establishment  of  the  city-owned  rapid  transit  lines 
is  a discrimination  against  interstate  traffic  from 
New  Jersey,  which  would  warrant  action  by  the 
Federal  Government.  Yet,  we  have  seen  that  if 
there  is  an  undue  discrimination  against  New 
Jersey  on  the  part  of  any  section  of  New  York 
City,  it  is  owing  to  these  transit  lines.  They, 
however,  fall  under  the  doctrine  stated  by  Justice 
Hughes  in  Minnesota  Bate  cases,  230  U.  S.  352, 
416,  as  follows : 

4 4 The  doctrine  was  thus  fully  established 
that  the  State  could  not  prescribe  interstate 
rates  but  could  for  reasonable  intrastate 
rates  throughout  its  territory.  The  exten- 


136 


sion  of  railroad  facilities  has  been  accom- 
panied at  every  step  by  the  assertion  of  this 
authority  gn  the  part  of  the  states  and  its 
invariable  recognition  by  this  court.  It  has 
never  been  doubted  that  the  State  could  if 
it  saw  fit,  build  its  own  highways,  canals  and 
railroads  (R.  R . Co.  v.  Maryland , 21  Wall, 
456,  470,  471).  It  could  build  railroads 
traversing  the  entire  State  and  thus  join  its 
border  cities  and  commercial  centers  by  new 
highways  of  internal  intercourse  to  be  always 
available  upon  reasonable  terms.  Such  pro- 
vision for  local  traffic  might  indeed  alter 
relative  advantages  in  competition,  and,  by 
virtue  of  economic  forces,  those  engaged  in 
interstate  trade  and  transportation  might 
find  it  necessary  to  make  readjustments  ex- 
tending from  market  to  market  through  a 
wide  system  of  influence;  but  such  action  of 
the  State  would  not  for  that  reason  be  re- 
garded as  creating  a direct  restraint  upon 
interstate  commerce  and  as  thus  transcend- 
ing the  state  power/ 9 

The  establishment  of  those  roads  was  a provis- 
ion of  local  foresight  and  the  product  of  local  tax- 
ation. That  they  should  be  removed,  because  New 
^Jersey  has  not  had  similar  foresight,  is  inconceiv- 
able, Yet,  they  might  just  as  well  be  removed  as 
to  increase  the  fares  upon  them  to  a mileage  rate 
equivalent  to  that  charged  on  New  Jersey  com- 
muting railroads,  some  of  which,  like  the  Pennsyl- 
vania and  the  Hudson  and  Manhattan,  give  pre- 
cisely similar  service. 

The  need  of  competition  on  the  part  of  the 
Long  Island  Railroad  with  these  lines  is  so  evi- 
dent as  to  need  ixo  further  argument,  particularly 
at  this  time  when  the  problems  of  congestion  and 
housing  are  so  acute  and  when  it  is  so  necessary 


137 


that  everything  should  he  done  to  spread  the 
population  of  New  York  City  over  its  outlying 
and  vacant  sections. 

Thus  the  problem  of  rates  on  the  Long  Island 
Railroad  within  the  City  of  New  York  is  “ pecu- 
liarly a local  problem,  ’ ’ such  as  was  compre- 
hended in  the  statement  of  Justice  Hughes  in  the 
Minnesota  Rate  cases  {supra),  which  I have 
quoted  above,  and  the  essence  of  the  Long 
.Island  application  in  this  case  is  to  the  effect 
that  the  Transportation  Act  has  given  to  the 
Interstate  Commerce  Commission  jurisdiction 
over  this  purely  local  matter. 

To  take  such  problems  out  of  the  hands  of  New 
York  itself,  would  be  the  negation  of  popular  local 
government,  the  acme  of  governmental  centraliza- 
tion, the  apotheosis  of  bureaucracy  and  the  aboli- 
tion of  the  last  vestige  of  state  rights.  It  has  been 
loosely  said  that  the  sections  of  the  Transporta- 
tion Act  under  which  this  complaint  is  brought 
were  aimed  at  the  elimination  of  the  State  regula- 
tory bodies.  We  respectfully  submit  that  if  those 
sections  permit  the  regulation  of  local  rates  in 
the  City  of  New  York  by  the  authorities  at  Wash- 
ington not  only  have  the  State  regulatory  bodies 
been  shorn  of  their  power  but  every  State  Statute, 
every  State  Constitution  and  the  very  theory  and 
fabric  of  our  Federal  Gevernment  under1,  our 
revered  Constitution  have  all  fallen  in  one  mighty 
calamity. 

It  appears  from  the  testimony  that  Chapter  868 
of  the  Laws  of  1920,  State  of  New  York,  was 
enacted  for  the  purpose  of  eliminating  discrimina- 
tions in  rates  on  the  Long  Island  Railroad  against 


35 


138 


the  citizens  of  Queens  as  compared  with  the  citi- 
zens of  New  Jersey. 

It  further  appears  that  since  the  20  per  cent,  in- 
crease given  the  New  Jersey  roads  by  this  Com- 
mission, a complaint  has  been  filed  with  the  Public 
Service  Commission,  First  District,  praying  for 
the  enforcement  of  that  act. 

It  was  said  in  Stone  v.  Farmers  Loan  & Trust 
Co . ( supra ),  at  page  334,  that: 

“ it  would  seem  to  be  a matter  of  domestic 
concern  to  prevent  the  company  from  dis- 
criminating against  persons  and  places  in  the 
State. 99 

Under  the  law,  railroads  are  entitled  to  a fair 
and  adequate  return  upon  the  value  of  their 
property  in  the  public  service,  and  since  the  Long 
Island  Railroad  claims  it  is  not  getting  such  a 
return,  it  should  prove  its  case  before  the  proper 
tribunal,  the  Public  Service  Commissions  of  this 
State,  and  get  that  to  which  it  is  entitled. 

The  Interstate  Commerce  Commission  Cannot  Be  Vested 
with  Authority  Sufficient  to  Equitably  Fix  Rates  on  Long 
Island. 

As  appears  in  the  evidence  local  fares  on  the 
Long  Island  from  Jamaica  to  Flatbush  avenue, 
nine  miles,  are  11  cents  or  at  a rate  of  1.1  cents 
per  mile.  Most  rates  on  the  Long  Island,  however, 
are  3 cents  per  mile.  At  Flatbush  avenue,  the 
Long  Island  connects  with  the  city  Rapid  Transit 
lines.  Recently  the  Woodside  and  Hunterspoint 
avenue  stations  of  the  Long  Island  have  been 
connected  with  the  city  system. 

The  uncontradicted  testimony  is  that  the  trains 
carrying  passengers  at  1 cent  per  mile  between 
Jamaica  and  Flatbush  avenue  are  crowded  and 


139 


that  this  is  the  most  profitable  division  of  the 
Long  Island. 

The  endeavor  on  the  part  of  the  civic  workers 
of  Queens  to  have  the  same  rates  and  service 
established  to  Woodside  as  to  Flatbush  avenue 
•is  not  unreasonable  and  would  undoubtedly  be 
successful  before  the  State  regulatory  authori- 
ties for  as  the  Supreme  Court  says  in  the  recent 
tease  of  Skinner  & Eddy  Corporation  v.  U.  S.,  249 
NJ.  S.  557,  “ low  rates,  because  voluntarily  estab- 
lished by  the  carriers  ” (as  these  rates  were) 
f*  may  be  accepted  by  the  Commission  as  evidence 
that  other  rates,  actual  or  proposal,  for  compara- 
ble service  are  unreasonable  high.” 

! But  if  rates  ai;e  to  be  fixed  unalterably  by  the 
(Interstate  Commerce /Commission,  who  will  eradi- 
cate such  discriminations  within  a single  State? 
(Certainly  the  State  cannot  and  neither  can  the 
Interstate  Commission,  for  discriminations 
purely  intrastate  are  not  its  affair. 

The  Interlocutory  Relief  Prayed  for  Should  Be  Granted 
Herein,  hut  the  Bills  of  Complaint  of  the  Plaintiff  Railroads 
Should  Be  Dismissed  for  Want  of  Equity. 

■ Dated  February  16,  1921. 

CHARLES  D.  NEWTON, 

Attorney -General. 

Edward  G.  Griffin, 

George  L.  Meade, 
f Deputies  Attorney -General. 


